We want to buy high quality companies, ideally at undervaluations.

Today, we will build on that idea by looking at how quality translates into compounding-

Not just in earnings, but across every layer of a company’s financial engine.

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💥 Amazon in 2000

In the year 2000, Amazon stock dropped by 80%.

Sentiment toward the stock market, internet companies, and Amazon was at an all-time low.

Then, Jeff Bezos shocked everyone with this letter to shareholders.

Instead of panicking, he highlighted how the company had never been stronger.

At the end of his letter, Bezos quoted Benjamin Graham:

“In the short term, the stock market is a voting machine; in the long term, it’s a weighing machine.”

But how do we measure whether or not the company is fundamentally getting stronger?

⚙️ The Power of Quality Compounding

Free cash flow per share is the ultimate driver of returns over the long term.

Growing free cash flow per share essentially means the company is growing intrinsic value.

However, there are multiple levers a company can pull to grow intrinsic value-

Let’s look at a Visa case study.

Below, we can see the compounded annual growth rates Visa had over a recent 5 year period:

You’ll notice that as we move down the income statement, each metric grew faster than the last.

How could this be the case?

1. 📈 Revenue Growth

Visa’s revenue grew at a double-digit rate over the 5 year time period.

Over the long term, sales growth is a key driver of stock performance.

2. 💰 Revenue → Gross Profit

Visa’s gross profit grows faster than revenue because high-quality companies expand their margins over time.

This happens when they can raise prices without losing customers.

Visa can raise transaction fees and expand into new services without losing customers.

Visa is a clear example of pricing power.

3. 📊 Gross Profit → Operating Income

Operating income grows faster than gross profit as the company becomes more efficient.

For example, reducing R&D, sales, and administrative costs relative to revenue can increase operating margins.

Each new dollar of revenue now contributes more directly to profit.

That’s operational leverage in action.

4. 💵 Net Income → Free Cash Flow

Free cash flow grows faster than net income as the company manages its cash more effectively, reducing capital expenditures while maintaining growth.

That’s the power of cash conversion.

5. 🧩 Free Cash Flow → Free Cash Flow per Share

Free cash flow per share grows faster than total free cash flow because companies like Visa use excess cash to buy back stock.

This shrinks the total share count and increases ownership per share.

If a company generates $10 million in free cash flow and has 1 million shares outstanding-

That’s $10 of free cash flow per share.

If the company uses some of that cash to repurchase 10% of its shares, the share count drops to 900,000.

Even if total free cash flow stays the same at $10 million, free cash flow per share rises also:

$10 million ÷ 900,000 = $11.11 per share.

That’s an 11% increase in free cash flow per share, without any actual business growth.

6. 🚀 Free Cash Flow per Share → Share Price

This is perhaps the most interesting part.

As mentioned above, free cash flow per share is the ultimate driver of returns over the long term.

Growing free cash flow per share essentially means the company is growing intrinsic value.

So if a company’s free cash flow per share grows 10%, does that mean its share price will grow 10%?

Not necessarily.

In a scenario like Visa, where the company is improving fundamentally at every level, share price will often grow faster than free cash flow per share.

The reason is because of the other engine of outperformance.

Multiple expansion.

Investors are willing to pay higher valuation multiples for companies that grow earnings and free cash flow at high rates, have predictable revenue streams, and are improving at every fundamental level the way Visa was.

⏳ Connecting The Dots

When you break down Visa’s growth, each layer builds on the one before it.

Revenue growth drives margin expansion, margin expansion drives operating leverage, operating leverage drives cash flow growth, and buybacks amplify it all.

But the beautiful part about this?

The market doesn’t always recognize it right away.

This is incredible news.

This is what creates incredible opportunities to be high quality companies at wonderful valuations.

As free cash flow per share grows, management’s ability to reward you as a shareholder grows, and over the long term, the amount they can pay you in dividends grows.

🏆 Our Dividend Growth Portfolio

Over the last year, we began the process of building our 2 real money portfolios:

• The Dividend Growth Portfolio

• The High Yield Portfolio

The first addition to our Dividend Growth Portfolio last year is currently going through the exact same situation Visa went through.

It’s improving at every fundamental level, allowing free cash flow per share to grow substantially faster than revenue.

And the performance of our portfolio over the last 6 months has been incredible:

To be honest, this performance has been incredible… BUT-

Our goal is not short term outperformance.

In fact, we expect there to be multiple short periods of time where we underperform.

Our real focus is to consistently add stocks that are improving fundamentally at every level (just like we saw Visa do above)-

And to add them at great valuations.

I think we’re off to a great start.

If you’d like to get access to the Portfolios and all the features below, you can do so here:

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• 📊 Full Access to the Dividendology Database
  Built with over $10,000 invested in tools and research, this powerful database tracks dividend stocks and alternative income assets like Covered Call ETFs, REITs, and BDCs.

• 📈 The Dividend Growth Portfolio
  A real-money portfolio built from scratch, focused on long-term wealth creation and building a rapidly growing stream of dividend income

• 💸 The High Yield Portfolio
  A real-money portfolio, designed to generate massive sustainable income with an average yield of 8%+

• 📉 Running List of Undervalued Dividend Stocks
  Updated regularly — stay ahead with a curated list of the most attractively valued dividend opportunities in the market

• 🧠 In-Depth Research & Reports
  Deep dives into dividend stocks and income strategies you won’t find on mainstream platforms

Check out these resources:

Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 ($30 off! + 7 day free trial)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

The message was obvious:

High yield stocks payout more in dividends…

In the short term.

But we also mentioned we would dive deeper into a High Yield asset class that is currently being completely overlooked.

In fact, overlooking High yield stocks happens frequently-

And that’s what leads to opportunity.

Today, we will be unveiling some of those opportunities.

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🏆 Buying High Yield Stocks

I see this quote all the time:

‘High yield means high risk’

While that can certainly be the case, I can assure you it is NOT always true.

Most people approach high yield investing the same way they play the old game minesweeper.

They start going around randomly clicking on squares, and maybe make a few lucky guesses-

But they are basically guaranteed to hit a mine eventually, ending their game.

Of course, if you know what to look for, you can strategically avoid the mines, and win the game.

This is a perfect metaphor for high yield investing.

There are two major advantages to high yield investing most don’t take the time to acknowledge:

1. 📝 Limited analyst coverage & market inefficiencies
   Unlike the mega-cap S&P 500 names that have Wall Street analysts dissecting every detail, many high-yield alternatives trade with less attention. This lack of coverage often results in pricing inefficiencies and misvaluations, both on the upside and downside.

2. 🔍 Greater opportunity for diligent investors
   For those willing to roll up their sleeves and learn the nuances of high yield asset classes (things like AFFO for REITs, NAV growth for BDCs, or option coverage ratios for Covered Call ETFs), there are chances to capture both yield and capital appreciation where the broader market overlooks it.

Today, we will be looking at opportunities in the preferred share space.

Preferred shares can become particularly attractive when a company’s common stock gets hit hard, dragging its preferred shares lower-

Even though cash flow still comfortably covers the preferred dividend.

That creates an opportunity to earn a high yield from a payout that remains well protected.

When the business and balance sheet remain healthy, that trade offers a compelling risk to reward for income investors.

Let’s review some of the top opportunities in the preferred space right now.

1.📱 AT&T

One concern weighing on AT&T’s common shares is the threat of SpaceX becoming a more meaningful competitor.

Investors are questioning what that competition could mean for AT&T’s growth and future cash flows years from now.

The predictability of the growth rate of future cash flows has been drawn into question.

That is exactly the type of situation where preferred shares become interesting.

A weaker outlook for cash-flow growth five to ten years from now can materially affect what investors will pay for the common stock.

However, the preferred dividend requires only a small portion of AT&T’s existing cash generation.

During the third quarter, AT&T generated approximately $5 billion in free cash flow against approximately $36 million in parent preferred dividends.

That represents roughly 139 times preferred dividend coverage, compared with approximately 2.6 times coverage for the common dividend after preferred payments.

Meanwhile:

• Series C preferred shares: 7.83% yield

• Series A preferred shares: 7.76% yield

We certainly give up some potential upside compared with the common shares, but we don’t need AT&T to deliver substantial growth to support this payout.

SpaceX could eventually affect the business, but I don’t consider it a threat for the preferred shares.

The main concern (really for all preferred shares) would be treasury yields climbing higher.

But the competitive uncertainty weighing on the common stock has not undermined current preferred dividend coverage.

That combination of negative sentiment, substantial coverage, and a high starting yield is what makes the opportunity compelling.

2. 🏗️ Brookfield Infrastructure

Brookfield Infrastructure’s Series 13 preferred units, BIP-PA, offer another interesting opportunity for income investors.

The common equity yields roughly 4.98%-

But the preferred shares now sit at 8.12%.

But again, what makes this worth examining is how little of Brookfield’s reported cash flow is needed to support its preferred distributions.

During the second quarter, Brookfield generated $702 million in funds from operations, compared with approximately $14 million in combined preferred distributions and perpetual-note payments.

That represents approximately 50 times coverage, with those payments consuming just 1.99% of FFO.

Even after subtracting maintenance capital spending, coverage remained approximately 40.5 times.

Meanwhile, common distributions and general-partner incentives were covered approximately 1.54 times by FFO, or 1.24 times after maintenance spending, after accounting for preferred and perpetual-note payments.

Again, the coverage makes preferred shares interesting.

We do give up the common units’ potential distribution growth and some upside-

But for someone looking to maximize income potential while reducing risk…

The preferred shares are compelling.

3. 🏢 REIT Preferred Shares

Not all REIT preferred are created equal.

But with this being an asset class that has historically delivered strong yields plus strong total returns-

Combined with the fact REITs are currently in one of their worst five year stretches in recent history-

Some REIT preferred shares have become compelling.

But REITs have come under pressure again, with the broad equity REIT index falling 5.7% in September alone.

Rising Treasury yields have been a major headwind.

And this follows an already inexpensive starting point.

Higher Treasury yields have been the primary headwind as fundamentals are improving for the most part.

But while interest rates obviously matter, they don’t tell the whole story.

Research from Cohen & Steers shows that the relationship between REIT returns and Treasury yields has repeatedly changed.

There have been periods when REITs rose alongside yields, and others when they moved in opposite directions.

So this means that the underlying business still matters.

Rental growth, occupancy, new property supply, and the valuation investors pay all help determine returns.

From 2022–2024, rising yields coincided with slowing REIT cash flow growth and falling valuation multiples.

In 2026, Cohen & Steers found something quite interesting:

Strengthening estimated cash flow growth alongside higher Treasury yields.

Through September 21, REITs had returned 11.6%, despite the 10-year Treasury yield increasing from approximately 4.2% to 5.0%!

Keep in mind that these charts cover REIT common stocks.

But for preferred shareholders, stronger cash generation will provide a larger cushion supporting their dividends.

Preferred dividends generally don’t grow alongside the business, and fixed-rate preferred prices remain sensitive to rising yields.

That’s why we focus on dividend coverage and leverage.

The three REIT preferred shares highlighted below offer approximately 6.6%–7.4% yields:

1. ADC-A: Agree Realty

2. DLR-J: Digital Realty

3. REXR-C: Rexford Industrial

They also provide substantial preferred dividend coverage and lower leverage than several higher-yielding alternatives.

You can see the preferred shares yielding in the 8% range have significantly more leverage and less dividend coverage.

Again, when the market pushes prices lower while that dividend cushion remains strong, the risk to reward becomes particularly attractive for income investors.

💎 My Top Preferred Stock

The above all present interesting opportunities-

And more importantly, healthy risk to reward scenarios.

However, my favorite preferred stock in the market is one we added to our High Yield Portfolio on Dividendology.com earlier this year.

When we added this preferred to our portfolio, it was yielding over 10%-

And we have since seen the stock climb by double digits as well.

At today’s prices, the yield is still higher than the overall yield on cost for our High yield Portfolio-

And the dividend is covered over 17x!

Let’s take a closer look…

Read more

Not knowing where they are on the dividend growth pyramid.

If you want to maximize your income, you must understand the dividend pyramid.

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📝 How You Should Invest

The end goal for most interested in dividends, is to be able to one day live off dividends.

However, the path to achieving that goal looks different for everyone.

Fortunately, the dividend growth pyramid tells you exactly:

• How to invest

• When to invest

• Where to invest

If we had to summarize what this means, this is the key concept:

• The longer your time horizon, the more you should focus on dividend growth.

• The shorter your time horizon, the more you should focus on yield.

This concept is best understood when visualized.

Over the long term, dividend growth stocks tend to payout more in dividends than high yielders.

But in the short to mid term-

High yielders typically pay out substantially more.

📊 My High Yielders

I often discuss how powerful a dividend growth strategy can be over long periods of time, particularly when it comes to living off dividends.

And as you probably already know, dividend growth stocks have historically outperformed.

In my personal portfolio, the bulk of my investments are dividend growth.

However, high yielding investments have the potential to be incredibly powerful when utilized correctly-

And it would be unwise to take advantage of them when they provide strong total return potential.

Believe it or not, that happens more often than you might think.

In fact, I currently have 2 high yielding stocks in my personal portfolio:

• EPD - Enterprise Products Partners (my yield on cost: 9.67%)

• MO - Altria Group (my yield on cost: 9.75%)

Not only is my yield on cost for both of these positions well above 9%, but I’ve seen phenomenal gains from these positions:

• EPD +95.44%

• MO +97.9%

Despite having yields on cost of nearly 10% for both positions, the total returns for these stocks have been incredible.

At the beginning of this year, I also added MPLX.

At the time, it was yielding roughly 8.5%.

That position has already grown by roughly 25%.

The idea that high yield automatically means high risk couldn’t be further from the truth.

📈 When Dividend Growth Overtakes High Yield

Let’s say you invest $100,000 in each of two portfolios:

1. Dividend Growth Portfolio: A starting yield of 3%, with dividends growing 10% annually.

2. High Yield Portfolio: A starting yield of 8%, with dividends growing 2% annually.

For simplicity, assume you spend the dividends, reinvest nothing, and make no additional contributions.

Here’s how much annual dividend income each portfolio would produce:

Initially, the high-yield portfolio produces more than twice as much income.

But in year 14, the dividend growth portfolio begins producing more annual income.

By year 25, it pays more than twice as much each year.

That doesn’t mean it has collected more dividends overall by year 14.

The high-yield portfolio built a substantial income lead during those early years.

Over the full 25 years, however, cumulative dividends reach approximately $295,041 for dividend growth versus $256,242 for high yield.

Of course, things like reinvestment and continually adding capital can change the model substantially as well.

🏦 High Yield vs. Dividend Growth

Last year, ahead of launching our two real-money model portfolios, I asked which strategy you were most interested in:

High yield or dividend growth.

The most popular answer was both!

Today, we’re building both the High Yield Portfolio and the Dividend Growth Portfolio-

Because each serves a different purpose.

The High Yield Portfolio emphasizes generating more income today, with a focus on generating a sustainable 8%+ yield.

Based on the 4% rule, this would reduce the capital needed to retire by 50%.

So far, this strategy has done incredibly well-

And we’ve been able to lock in a yield on cost of 9.37%.

Not only have our dividends been sustainable, but the underlying holdings have actually grown their distributions this year!

The Dividend Growth Portfolio emphasizes companies that can increase their dividends substantially over time.

The past few months for the Dividend Growth Portfolio have been incredible.

If your goal is to one day live off dividends-

Both strategies can play a role.

The right balance depends on when you need the income and how much time you have to let it compound.

This is exactly why we must understand the Dividend Growth Pyramid.

Ultimately, it will help you back into the type of strategy you should pursue.

💡 The Goal of Dividendology

The goal of this newsletter is to help you compound your knowledge and your wealth-

And to make this the number 1 place for information and research on dividend growth and high yield strategies.

Next week, we will be diving deeper into a High Yield asset class that is being completely overlooked by the market right now.

These stocks will be potential candidates for the High Yield Portfolio.

As a reminder, you can get access to all of the following by becoming a member of Dividendology.

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See you soon!

Dividendology

Check out these resources:

Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 ($30 off! + 7 day free trial)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

The goal is simple:

To achieve dividend income growth of 7–10%+ annually, while maintaining capital appreciation in line with or better than the S&P 500 over a full market cycle.

This of course is exactly what dividend growers have done over the last 50+ years-

And have done so with lower levels of volatility than the market.

So far, I’ve been exceptionally pleased with the way our portfolio is shaping up.

While the portfolio slightly lagged the market to start the year-

It has come roaring back over the last 6 months.

In fact, our Dividend Growth Portfolio has more than doubled the performance of the S&P 500 since the end of April.

While this is exciting to see-

The reality is that our portfolio is not being built for short term performance.

This becomes abundantly clear when looking at the underlying fundamentals of the portfolio.

Our holdings are growing revenue and earnings at a much faster rate than the S&P 500-

With far better capital allocation and capital intensity.

Not to mention, our holdings are growing dividends twice as fast as the S&P 500 is, while also maintaining a higher yield.

Ultimately, dividend growers ability to outperform boils down to the most important task of management:

Capital Allocation.

Today, we will look at a case study I would venture to say 95%+ of investors don’t understand surrounding capital allocation.

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🎯 Capital Allocation

We talk about capital allocation frequently on Dividendology.

Why?

Because the ultimate goal of managment is to maximize long term returns…

And they do that by properly allocating capital.

Every profitable company generates free cash flow.

There are 5 ways to use free cash flow:

1. Reinvest into the business

2. Mergers & Acquisitions

3. Pay Down Debt

4. Share Buybacks

5. Dividends

Each capital allocation decision has the potential to benefit shareholders in a different way.

🌱 What Makes a ‘Growth’ Stock?

What does it mean for a stock to be a ‘growth stock’?

From a capital allocation stand point, most would assume that means they reinvest a large percentage of their free cash flow back into the business.

That’s how companies achieve double digit EPS growth, right?

Maybe sometimes…

But look at Mastercard.

In 2025, Mastercard returned 88.1% of its free cash flow to shareholders:

• $11.73 billion in buybacks: 71.4% of FCF

• $2.76 billion in dividends: 16.8% of FCF

  

How can a ‘growth’ company return so much cash while still growing EPS at a double digit rate?

Secular growth.

Growth the company can achieve without the need for reinvestment.

Mastercard can process more payments through its existing network without needing a proportional increase in capital investment.

It doesn’t need to build factories, carry inventory, or fund the loans behind those transactions.

This entirely explains how they achieve such a high return on invested capital.

Its network supports growing profits with relatively little additional capital.

And those buybacks further support EPS growth by reducing the number of shares dividing up its earnings-

And ironically enough, a reduced share count also increases the rate at which they can grow dividends on a ‘per share’ basis.

When evaluating a stock, ask how much reinvestment it needs to produce that growth, and what return it earns on that investment.

The irony is that Mastercard is widely viewed as a growth stock, but its capital allocation looks much more like a shareholder return stock.

Its business requires so little capital to expand that it can pursue growth while returning most of its free cash flow through buybacks and dividends.

Let’s dive deeper into what this actually looks like.

🧮 The Compounding Formula

Here’s perhaps one of the most important formulas to understand:

This framework helps explain how much additional capital a business needs to support its growth.

Reinvestment is measured relative to after-tax operating profit, and the return earned on that new investment is what matters.

The higher the return, the less capital a company needs to reinvest to achieve a given growth rate.

To illustrate Mastercard’s advantage, suppose it could earn a 50% return on new invested capital and reinvest 20% of its after-tax operating profit:

50% × 20% = 10% earnings growth

A company earning a 10% return would need to reinvest 100% of its after-tax operating profit to achieve that same growth rate.

Both companies achieve 10% growth…

But one requires five times as much reinvestment.

That difference creates room for dividends, buybacks, and other uses of capital.

You can also flip the formula around:

For Mastercard, the appeal is that additional payment activity can generate more profit without requiring a proportional expansion of its capital base.

It can fund growth while leaving substantial cash available for shareholders.

Buybacks can then support additional growth in earnings per share by reducing the share count.

A business that needs relatively little additional capital to grow has more flexibility to increase dividends while continuing to expand.

⚙️ Capital Efficiency

So remember how we highlighted how the capital efficiency of our Dividend Growth Portfolio was substantially stronger than the S&P 500?

Now you can see why this is so important to me.

We are generating a yield above the S&P 500, with dividend growth at TWICE the rate-

Without our holdings sacrificing growth.

Let’s now analyze the ROIC for each of the stocks in our Dividend Growth Portfolio.

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Members will get access to the full list every month, as well as all other Dividendology features.

This month, we have 74 stocks on the list.

Let’s dive in.

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1. 🔬 ASML Holding (ASML)

Wall St. Price Target: $2,584.04 | Upside: 55.59%

We originally added shares of ASML into our portfolio in 2025 at close to $700 a share-

And the stock has climbed well over 100% since then.

The exact same thesis then is still playing out today, making this an interesting opportunity.

The AI semiconductor supply chain runs through a company with a monopoly on some of its most important manufacturing equipment.

ASML builds lithography machines, which use light to print small circuit patterns onto silicon wafers.

Its greatest competitive advantage is extreme ultraviolet lithography, or EUV.

ASML is the world’s sole supplier of these systems, which chipmakers use to manufacture advanced processors and memory.

Nvidia, AMD and the cloud companies can compete over chip designs, but manufacturing their most advanced products depends on equipment further up the supply chain.

ASML occupies a critical position in that process.

Its monopoly specifically covers EUV systems, rather than every type of chipmaking equipment.

Developing the technology required decades of engineering and a specialized supplier network, creating an enormous barrier for potential competitors.

The recent earnings report shows how that position is translating into growth.

Third-quarter revenue reached €11.7 billion, with a gross margin of 57.5%. Management now expects full-year sales between €44 billion and €45 billion.

Equipment sales increased from approximately €6.6 billion in Q2 to €8.4 billion in Q3.

Logic represented 54% of system sales and memory represented 46%, showing that ASML benefits from investment across both major chip categories.

But here’s the part I truly love about the business:

The growing business of servicing and upgrading machines already installed.

The ‘Installed Base Management’ portion of the business has recurring revenue characteristics.

Each additional EUV machine sold expands the fleet that customers rely on ASML to service, maintain and upgrade throughout its operating life.

It’s a quite beautiful model.

Management’s comments also suggest that demand will remain strong for years (which again leads to growing revenue in Installed Base Management).

CEO Christophe Fouquet said:

“Some customers are expressing an interest in placing orders with us for 2029 and even 2030.”

He also said planned supply for 2027 and 2028 would not fully meet expected customer demand.

As a result of this demand, EPS growth rate projections are exceptionally high over the next few years.

So while trailing twelve month P/E multiples are well above 40x-

Forward looking P/E multiples look quite attractive for a stock that is a monopoly, has growing recurring revenue streams, and customers trying to book orders years in advance.

ASML trades at approximately 26 times next-12-month normalized earnings, compared with a five-year average of 33.7 times.

That’s roughly 23% below its historical average multiple.

2. 🛢️ Energy Transfer (ET)

Wall St. Price Target: $24.36 | Upside: 20.97%

At the beginning of this year, we released our top 10 high-yield stocks of 2026, and Energy Transfer made the list.

At the time, it yielded around 8.2%.

Since then, its total return has reached approximately 28%, compared with roughly 13% for the S&P 500, more than double the market’s return.

These are exactly the types of opportunities we look for as we build our high-yield portfolio on Dividendology.com.

Despite that run, Wall Street’s average price target still implies approximately 21% upside.

Historically, I haven’t been a huge fan of oil stocks because of the immense volatility in commodity prices.

Anyone who could consistently predict the price of oil would probably be the wealthiest person in the world.

Energy Transfer’s business model makes it particularly interesting.

Approximately 90% of its core adjusted EBITDA is fee-based, reducing its direct exposure to commodity prices.

Customers pay Energy Transfer to gather, process, transport and store energy products.

For example, a producer can pay a contracted fee to move natural gas through a pipeline, rather than Energy Transfer’s profit depending entirely on what that gas sells for.

Commodity prices can still affect production volumes and customer health, but those fees make cash flows more predictable.

That brings us to the distribution, which currently yields approximately 6.84%-

And has continued to grow at a healthy rate over the last few years.

Estimates show approximately $2.89 of distributable cash flow per unit against $1.37 of distributions-

Implying roughly 2.1 times coverage and a payout ratio near 47% for 2026.

Energy Transfer is also expanding through acquisitions.

On October 6, it agreed to acquire Vaquero Midstream for $2.625 billion, with closing expected in the fourth quarter.

The deal adds three natural-gas processing plants with approximately 675 million cubic feet of daily capacity, supported by contracts averaging roughly 10 years of remaining life.

These assets already connect to Energy Transfer’s downstream infrastructure, creating opportunities to earn additional transportation, processing and export revenue.

Management expects the acquisition to immediately increase distributable cash flow per unit after closing.

Management is targeting 3% to 5% annual distribution growth over the long term.

Using 3% distribution growth in a dividend discount model currently implies roughly 22% upside-

Which happens to be incredibly close to the average analyst price target.

3. 📊 Interactive Brokers (IBKR)

Wall St. Price Target: $106.64 | Upside: 28.99%

You may have heard of Interactive Brokers because it’s the broker we use at Dividendology.com to track our Dividend Growth and High Yield Portfolios.

You can check out Interactive Brokers here:

Interactive Brokers

But have you ever considered Interactive Brokers as a potential investment?

Interactive Brokers operates a global brokerage platform that helps individuals, financial advisers and institutions invest across more than 175 markets.

The company generates revenue when customers:

1. Trade

2. Borrow against their portfolios

3. Hold cash on the platform

Trading generates commissions, while margin loans and customer cash generate interest income.

After paying interest and funding costs, the difference contributes to net interest income.

Its appeal to customers is broad market access, competitive pricing and sophisticated tools, supported by decades of investment in automation.

For shareholders, the investment thesis starts with attracting more accounts and assets.

A larger customer base creates more opportunities to earn commissions and interest. Automation helps the company serve those customers without requiring expenses to increase proportionally.

This strategy is continuing to gain traction.

Customer accounts increased 35% to 5.58 million, while customer equity rose 27% to approximately $965 billion.

Margin loans increased 36% to $105.2 billion, expanding the balances on which Interactive Brokers earns interest.

Third-quarter commission revenue increased 12% to $602 million, while net interest income rose 19% to $1.15 billion.

Dividend investors also received a meaningful increase.

Management raised the quarterly dividend from $0.0875 to $0.15 per share-

An increase of approximately 71%.

The new annualized payment is $0.60, producing a forward yield of approximately 0.73%.

At approximately $83, the stock trades around 31 times 2026 earnings.

If we look at them from a price-to-earnings-growth (PEG) perspective, we see they trade at a premium due to projected 21% EPS CAGR over the next 3-5 years.

This certainly doesn’t make them the ‘cheapest’ on a PEG basis-

But that level of earnings growth does does justify a premium valaution.

The supplied forecast shows 12 analysts with an average price target of $106.64, implying approximately 29% upside from $82.67, before dividends.

The case for owning Interactive Brokers rests on continued customer growth, efficient operations and rising earnings supporting future dividend increases.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

Read more

Understanding valuation.

“Price is what you pay, value is what you get.” - Warren Buffett

And today, I’m happy to have my friend, Dave Ahern from Dividend School walk us through 3 ways to value a dividend stock.

With that being said, I’ll let Dave take it from here!

Valuation

A 6.9% yield sounds too good to be true or a gift, while a 1.5% yield sounds like a waste of time.

Both thoughts can cost you money, because yield tells us about profits. It tells us nothing about the price or whether it makes sense.

In today’s article, we will cover:

• Why yield is not a good measure of value

• Price to Free Cash Flow as Tool One

• The Reverse DCF as Tool Two

• The Dividend Discount Model as Tool Three

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Okay, let’s dive in and learn how to value dividend stocks.

Why Yield is Not a Good Measure of Value

Valuation answers one simple question. How much cash do we receive for every dollar we spend today, and how much will we get in the future? A bird in the hand is worth more than two in the bush.

Yield only answers the first year of that question, not the future. Two scenarios- a 6.9% yielding company that never grows the dividend and one that yields 1.5% but raises its dividend by 14% are two completely different questions.

We need tools that account for the:

• Price

• Cash behind the dividend

• Growth of dividend

Luckily, we have three tools we can use to cover almost all dividend payers. We can use price-to-free cash flow as a quick screener. The reverse DCF as a growth-story checker and the dividend discount model for stability.

Of course, we will always have exceptions. For example, for REITs, using P/FCF is a waste of time. Instead, I would substitute something like AFFO (adjusted funds from operations) for both the relative metric and the reverse DCF. And for MLPs, you’d want to substitute distributable earnings for free cash flow.

For each business model, you can alter or substitute its representative metric to help you find its fair value. The trick is knowing which metric and how to apply it.

Always treat these tools as methods to find the fair value, not as the end-all, be-all.

Lastly, I like to use all three as a form of sanity check to ensure I am not drinking the so-called Kool-Aid.

Tool #1: Price to Free Cash Flow

Free cash flow is the cash left over after a company pays its bills and reinvests in the business. Take cash from operations and subtract capital expenditures; simple. That leftover money funds the dividend, along with other reinvestments. As dividend investors, it is the number we should check first.

Price to free cash flow compares the company’s price tag to that leftover cash:

P/FCF = market cap ÷ free cash flow

Let’s look at Coca-Cola ($KO) as our guinea pig, because it teaches a good second lesson at the same time. The raw numbers from Coca-Cola’s 2025 10-K look scary at first blush:

• Operating cash flow: $7.4 billion

• Capital expenditures: $2.1 billion

• Free cash flow: $5.3 billion

If we do the math, Coca-Cola a $372 billion market cap is producing $5.3 billion in free cash flow. That translates to a 70x free cash flow ($372 / $5.3 = 71.5x). That seems off, and after digging into the cash flow statement, we can discover why.

This is the second lesson.

In 2025, Coke paid a one-time $6.1 milestone payment related to its fairlife acquisition. We can find this disclosure in the Q4 release.

If we add that back to the cash flow (it’s a one-time adjustment), then the normalized free cash flow equals $11.4 billion.

Lesson: always read the cash flow statement and calculate it yourself to double-check the math and ensure there aren’t any “funny” things in there.

Digging deeper, we can see that company management’s guidance provides even more clarity. In their Q2 2026 release, they announced cash flow guidance of $12.6 billion for the full year.

Now, let’s run the metric again:

• 2026 guided free cash flow: $12.6 billion

• Diluted shares: 4.31 billion

• Free cash flow per share: $2.88

• Price: $86.48 (as of this writing)

• P/FCF: 30x

At 30 times free cash flow, every dollar we buy equals about 3.3 cents of cash generated. Coke’s annual dividend of $2.12 consumes around 74% of free cash flow, a comfortable level for a stable business like Coke.

The multiple alone can’t tell us whether Coke is cheap or expensive, but it can help frame the question. If you adjust the multiple, we can see a range of values:

• 25x: about $72

• 28x: about $80.50

• 30x: $86.48

Another good practice is to look at the range over longer periods, for example, 5-10 years. And to compare it to others in its industry.

For example, Coke is trading at 30x free cash flow, with a high of 90x, a low of 18x, and a median of 28x. Pepsi is currently trading at 24.5x, and Dr Pepper is 26.4x.

What does this tell us?

That the company is trading roughly in the range of its “normal” value.

Remember, P/FCF, like any multiple, is a screen, and screens have limits. Multiples treat dividend growth the same as if the dollar of free cash flow were equal.

• For REITs: Substitute AFFO for free cash flow (P/AFFO)

• For MLPs: Use Distributable Cash Flow (DCF) for free cash flow (P/DCF)

• For BDCs: Use Net Investment Income for free cash flow (P/NII)

Quick pause before we get there. You just cleaned up Coke’s free cash flow number the same way we do it every week in Dividend School. The rest of this lesson, the reverse DCF and the dividend discount model, is free below. Subscribe, and next week’s walkthrough lands in your inbox too.

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Tool 2: Reverse DCF

Many investors are familiar with a discounted cash flow model, which takes free cash flow, projects it into the future, and then discounts it back to the present. The big problem with the DCF is you have to predict cash flows into the future. And I don’t know about you, but my crystal ball is quite cloudy, so future predictions remain tough.

And with every prediction, you have to ask: is this reasonable for the business?

The reverse DCF flips the script. You start with the one absolute known input, the price. And then we work backward from the price to determine what growth is the market baking into the price and at what discount rate.

Two terms we have to understand:

• Discount rate: the annual return you require to compensate for the risk of owning this business. We have several ways to determine an appropriate discount rate. One is to use a set rate regardless of the company, and most people use 10% as a sensible rate. The second is to calculate the cost of capital or WACC, which is a little complicated and involves a lot of assumptions, but is more precise company to company.

• Terminal rate: this is the growth rate we will assign the company beyond our projections, typically after 10 years. This is the forever growth rate assuming the company remains viable. Most investors use their economy’s growth rate, and here in the US, we can use 2-4% to keep it simple. WARNING: It can never exceed the economy’s growth rate, NEVER.

We are going to use MSCI for our guinea pig for the reverse DCF. The process is the same regardless of the company. MSCI runs indexes which track trillions of dollars, collects subscription-like fees, and converts a ton of revenue into cash. It’s quite profitable to say the least.

Inputs for our reverse DCF based on Q2 2026 earnings:

• 2026 free cash flow guidance: $1,485 million to $1,545 million

• Free cash flow per share (72.9 million diluted shares): $20.78 (midpoint)

• Current price: $561.71

• P/FCF: 27x

Okay, now let’s look at a reverse DCF based on the above numbers. Let’s use a 10% discount rate, a 3% terminal growth rate with a 10-year horizon.

To get to our current price of $561, the market implies MSCI must growth free cash flow per share by 11% a year for the next decade.

The big question then. Does the 11% seem believable? If check the company history we can see a good base case:

• 2020 free cash flow per share: $9.56

• 2025 free cash flow per share: $21.06

• Five-year growth rate: 17.1%

History tells us MSCI has grown faster than the market implies or the price indicates. Both have had a helping hand from good revenue growth and a reduction in shares outstanding over the same period. The dividend has also grown, from $2.98 per share to $7.57 per share or 20.4%.

The gap between what the market believes and what history tells us is where we earn our money. If you believe index investing continues to compound and MSCI keeps buying back stock, then the price is asking less from you than MSCI has delivered. If you believe index investing has seen better days, then the 11% becomes a lot harder to achieve.

One warning: the reverse DCF is sensitive to changes in both the discount rate and terminal rate. For example, if we drop the discount rate to 9%, then the implied growth rate falls to 8.5%.

A good practice with a reverse DCF, run the model with two or three discount rates to get a range of possible outcomes. And then decide what’s reasonable based on your knowledge of the company.

As with P/FCF, substitute the same metrics above for free cash flow for a REIT, BDC, or MLP.

Tool 3: Discounted Cash Flow Model

The dividend discount model values companies based on the present value of all its future dividends, thus the name. The simplest version (which we use), the Gordon Growth Model, needs only three inputs.

Value = next year’s dividend ÷ (required return - dividend growth rate)

Works best for stable dividend growers with rates below the required return. For example, MSCI from above, would break in this model because 10% minus 13.9% gives us a negative number.

Steady growers work best like Coca-Cola, Proctor & Gamble, and Johnson & Johnson.

Today, we are going to use a REIT, VICI Properties ($VICI). For those unfamiliar, VICI owns real estate specializing in casinos on the Las Vegas Strip. Examples include Caesars Palace and the Venetian.

As mentioned earlier, we measure a REIT’s cash flows as AFFO, or adjusted funds from operations. AFFO strips depreciation and other non-cash items from earnings.

Here are some inputs from VICI’s Q2 2026 earnings:

• Current dividend: $0.45 quarterly, $1,80 annualized

• Dividend record: 8 straight years of raises since 2018 IPO

• Dividend growth: 7.1% a year since 2019, with recent raises closer to 4%

• 2026 AFFO guidance: $2.45 to $2.47 a share, with a payout ratio near 73%

• Current price: $25.98, for a 6.93% yield

We will use 4% raises for the growth assumption. The earlier years represent a different interest rate environment, and the current raises are more conservative (always a bonus).

Now the math.

• Next year’s dividend: $1.80 x 1.04 = $1.87 (10% required return)

• Current value: $1.87 ÷ (0.10 - 0.04) = #31.20

• With an 11% required return and the same growth rate: $26.74

• With an 9% required return and the same growth rate: $37.40

How to interpret all this?

At $25.98, the DDM is telling us that VICI is priced to deliver 11% return if the 4% dividend growth rate holds. We determine the 11% return based on the 6.9% yield and 4% dividend growth.

Again, always use a range of numbers to help give you a sense of what’s possible and reasonable.

As mentioned earlier, the sensitivity warning applies doubly here. The denominator is a small number, so a one-point change in either assumption swings the value big.

How to Use These Tools in Your Process

Use these tools as a process to determine a fair value for every company you buy.

Use the P/FCF or substitute as a screener to find good investment ideas. Compare to historical performance over 5 to 10 years, and then compare to others in the same industry.

Next, run a reverse DCF to determine what growth rates the market is implying with the company’s current price. Judge these assumptions against the company history to determine reasonableness. Remember it is sensitive to the inputs of both the discount rate and terminal growth rate.

And finally, run the DDM to determine a fair value based on the growth of the dividend, which is what we are buying, not the cash flows.

Go a step further than most, write down your assumptions. Six months from now, check those assumptions and determine whether the thesis is still good or broken.

Common Mistakes to Avoid

A few traps to avoid:

• Trusting headline free cash flow numbers without verifying with the financials.

• Using a DDM on a fast growing dividend payer like MSCI, V, or MA

• Treating any ouput as a point estimate. Every number you calculate should measure against a range of numbers.

• Always, always check the free cash flow payout ratio or business relevant coverage.

Final Thoughts

None of these tools predict the future; wish they did. But treat them as a method to tell what a company might be worth. And our job is to decide whether or not those assumptions are reasonable.

Value the cash, check the dividend coverage, and understand the dividend growth you are paying for before we buy any company.

Until next time, take care and be safe out there,

Dave

It’s already happened.

Since last August, the Vanguard real estate ETF is down by 11.5%, while the broader market is down by 4.53%.

This is of course primarily due to one thing:

A substantial rise in treasury rates in a very short period of time.

Over the past month alone, the 2-year Treasury yield has climbed roughly 38 basis points.

The 10-year is up 45 basis points, and the 30-year has increased 35 basis points.

For perspective, 100 basis points equals one percentage point.

The increases are even larger compared with a year ago.

This of course impacts dramatically how attractive investors find the dividend yield of REITs when comparing Treasury yields as the alternative.

This certainly weighs down the price of REITs-

But impacts them in another (much more significant) way that most investors are missing.

And many REITs are addressing this issue in their own unique way.

The issue?

Cost of capital.

Let’s review 3 popular REITs and how they are attempting to mitigate this difficult environment.

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🏢 How REITs Make the Numbers Work

At a basic level, these REITs own properties, lease them to tenants, and collect rent.

The ultimate goal is to grow AFFO per share, the north star metric for REITs.

If AFFO per share is growing, then generally speaking, intrinsic value is growing.

But the way REITs drive AFFO per share growth is far different from most stocks.

REITs are required by law to payout 90% of their taxable earnings in the form of a dividend-

Which leaves little capital left over for reinvestment back into the business.

This is why REITs have historically grown via two methods:

1. Taking on debt

2. Issuing shares

Both come with a cost.

When a REIT borrows money, it pays interest. The higher the interest rate, the more rental income must go toward servicing that debt.

Issuing shares has a cost as well.

Every new share represents another claim on the company’s cash flow.

The properties purchased with that capital must generate enough additional income to increase AFFO per share after accounting for the larger share count.

For example, raising $100 million at $50 per share requires issuing 2 million shares.

At $40 per share, raising that same amount requires issuing 2.5 million shares.

The company receives the same capital, but the income it generates must now be divided among more shares.

That’s why falling share prices make equity capital more expensive.

The goal is to invest that capital at a return that exceeds its financing cost. This is called spread investing.

Imagine a REIT acquires properties at a 7% initial annual yield and funds the purchase with a mix of debt and equity carrying an estimated blended cost of 5%.

The difference is a 2-percentage-point investment spread.

On a $100 million acquisition, that represents approximately $2 million annually before overhead and other adjustments.

It’s a simplified example, but it illustrates the economics.

Now imagine the blended financing cost rises to 6.5%.

The same properties still generate a 7% initial yield, but the spread shrinks to just 0.5 percentage points, or approximately $500,000.

The properties haven’t changed.

Their rental income hasn’t changed.

…But the economics of buying them have become much less attractive.

That is the challenge REITs are facing right now as Treasury yields rise while their share prices fall.

• Higher Treasury yields generally push up the cost of new borrowing.

• Lower share prices increase the dilution associated with raising equity.

Unless acquisition yields rise enough to compensate… The investment spread narrows.

And that brings us to VICI Properties, Realty Income, and Agree Realty-

Each of which has a different way to navigate this environment…

Which will have serious implications for long term AFFO per share growth.

1. 🎰 VICI Properties

Are you concerned about VICI stock?

The REIT is now down 26% in the last year.

While their primary issue continues to be the fact their largest tenant is being taken private-

Let’s address their cost of capital issue.

VICI recently announced a 2.2% dividend increase.

Management had previously indicated that dividend growth should roughly track AFFO per share growth.

Its latest 2026 guidance implies approximately 3.4% growth at the midpoint.

So the dividend is growing slower than their cash flow.

Why would this be the case?

There are a few potential explanations worth watching:

1. Management could eventually revise AFFO guidance lower.

2. It could be setting dividend growth based on a more conservative outlook beyond 2026.

3. It could be targeting a lower payout ratio

The most likely scenario is number three, due to changing cost of capital.

As we discussed above, VICI faces higher costs on new borrowing while its lower share price makes issuing equity less attractive.

That makes the cash it generates internally more valuable as a source of funding.

Growing the dividend at a slower rate than AFFO growth allows VICI to retain more cash than it otherwise would.

That capital can then be used to help fund investments which decreases the need of the company to issue stock or take on debt.

This helps alleviate their increasing cost of capital.

If AFFO growth continues to outpace dividend growth over time, the payout ratio will naturally decline as well.

Accepting a smaller dividend increase today will support future growth and balance-sheet flexibility.

The benefit ultimately depends on how effectively management uses the retained cash.

I wouldn’t interpret a 2.2% increase as evidence that the dividend is immediately in trouble.

Based on current guidance, it remains well covered by AFFO.

We need to be looking closely for further indication as to whether the smaller increase reflects a deliberate decision to preserve capital, a more cautious growth outlook, or a combination of the two.

2. 💵 Realty Income

Realty Income is down 7.5% in the last year.

Like VICI and all other REITs, they are facing the same cost of capital issue.

Instead of simply decreasing dividend growth to retain cash flow, they decided to take a much different approach

Again, historically REITs could either:

1. Issue debt

2. Issue shares

But Realty Income is developing another way to fund investments and grow cash flow.

Management calls this evolution “Realty Income 3.0.”

The idea is to combine its traditional property ownership business with an investment management platform, using its relationships and real estate expertise to invest alongside outside capital.

Here’s how that works:

Institutional investors contribute capital to a fund or partnership.

Realty Income sources properties, evaluates the investments, and manages the portfolio.

It invests some of its own capital alongside those investors and can also earn management fees.

This allows Realty Income to generate earnings without supplying every dollar needed to purchase the properties.

In its traditional model, acquiring a property requires Realty Income to fund the purchase through some combination of debt, equity, retained cash, or asset sales.

With third-party capital, outside investors fund part of the investment.

Realty Income earns returns on its ownership stake, while applicable management fees provide an additional source of income.

That creates the potential to generate more earnings relative to the amount of its own capital invested.

For a simple illustration, managing $1 billion of fee-paying capital at a 1% annual fee would generate $10 million of gross annual fee income before expenses.

This is a strategy that is already being implemented.

At the end of Q2, Realty Income reported approximately $2.68 billion of fee-earning equity under management.

Quarterly management fee income reached $3.2 million, up from $2 million in Q1.

Keep in mind that fee income still remains a small part of the overall business-

It will take time for this platform to become a substantial earnings contributor.

However, we need to admit that the timing of Realty Income 3.0 is quite impressive, as their other sources of capital have become far more expensive.

This was no doubt an impressive move by the management team.

Realty Income’s latest 2026 guidance calls for AFFO per share of $4.44–$4.45, representing approximately 4% growth at the midpoint.

I’ll be interviewing Realty Income CEO, Sumit Roy, and releasing it on the Mispriced Podcast in the coming days.

3. 🛒 Agree Realty

Agree Realty is down 6.5% in the last year.

But their approach to cost of capital is perhaps the most compelling in the REIT space.

ADC entered this environment with financing already arranged and limited near-term pressure to refinance its long-term debt.

That gives management more flexibility to keep investing without urgently raising capital on unfavorable terms.

At the end of Q2, ADC reported approximately $1.9 billion of liquidity, including roughly $1.1 billion of anticipated proceeds from outstanding forward equity offerings.

It also highlighted no material long-term debt maturities until 2028.

No debt maturities means they don’t have to refinance their debt during this higher rate environment, meaning less interest expense, meaning higher AFFO per share growth-

But the forward equity part is quite important as well.

These agreements allow ADC to arrange an equity sale and receive the proceeds later when it settles the transaction.

In this case, the company had substantial equity capital arranged before the recent selloff.

Remember our earlier example:

A lower share price requires a REIT to issue more shares to raise the same amount of money.

By arranging equity ahead of time, ADC reduced its dependence on whatever price investors are willing to pay for its shares today.

Those agreements still involve issuing shares, and settlement proceeds are subject to contractual adjustments-

But they provide visibility into funding that would otherwise depend on future market conditions.

ADC also continues to project quite strong growth overall.

Its latest 2026 AFFO guidance is $4.57–$4.59 per share, representing approximately 5.8% growth at the midpoint.

That is faster than the current full-year growth projections for VICI and Realty Income.

At the end of Q2, ADC was 99.8% leased, with 65.8% of annualized base rent coming from investment-grade tenants.

In my recent interview with CEO Joey Agree, his five-year dividend-growth aspiration translated into approximately 4.5% annual growth.

ADC is already in a strong position (perhaps stronger than anyone else) to handle the increasing cost of capital with plenty of cash on hand.

This is one of the healthiest REITs on the market today.

💸 What to Watch

REITs have fallen dramatically in the last few months-

And every single REIT on your watchlist must be looked at closely through the lens of cost of capital.

This will look different for basically every REIT.

VICI’s slower dividend growth preserves more cash internally.

Realty Income is building a platform that attracts outside capital and generates management fees.

Agree Realty has equity financing arranged in advance and limited near-term pressure to refinance its long-term debt.

Each approach gives management more flexibility, but the ultimate test is the same:

Can these companies continue growing AFFO per share in an environment where cost of capital is rising?

If you want to get access to the REIT database, as well as everything mentioned below, then you can do so here:

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And so far it has recorded 28 all-time highs so far in 2026.

But where is the market headed next?

Well, JP Morgan just recently released their Q4 Guide to the Markets.

It's over 71 pages of institutional-grade research with hundreds of charts and data points.

I just went through the entire document and compiled the 7 most important charts for us to review.

Let’s dive in.

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1. 📊 Market Valuation

At the January 2022 stock market peak:

• S&P 500 forward P/E: 21.4x

• 10-year Treasury yield: 1.6%

As of the end of September 2026:

• S&P 500 forward P/E: 19x

• 10-year Treasury yield: 5.3%

After climbing over 62% since the start of 2022, the market trades at a LOWER forward earnings multiple.

Expected profits have grown faster than stock prices.

The market is cheaper on a forward P/E multiple basis.

However, calling the market “cheaper” based on that comparison alone leaves out something very important:

The competing return available from Treasuries has changed dramatically.

Paying 19x expected earnings when the 10-year yields 5.3% is not automatically a better deal than paying 21.4x when Treasuries yield 1.6%.

The higher Treasury yields have increased the discount rate applied to future cash flows dramatically and also raise the return investors require to justify taking equity risk.

2. 💰 Sources of Returns

I’ve talked often about looking at investments through the lens of sources of returns over the years-

And this chart shows exactly why.

Stocks have climbed in 2026 even as valuation multiples have fallen.

Year-to-date total returns in U.S. dollars:

• U.S.: +12.7%

• Japan: +23.0%

• Emerging markets: +23.7%

Earnings have been the largest positive contributor across every market shown, more than offsetting falling valuation multiples.

3. 💸 Still Historically Expensive

As seen above, rapid earnings growth has led to a decline in valuation multiples.

But even with the S&P 500 at 19x forward earnings, we’re still well above the 30 year average valuation of the market.

To be fair, this is warranted to some degree.

Businesses have better margins as well as stronger earnings growth.

4. 📉 Market Pull Backs Are Normal

Since 1980, the S&P 500’s average intra-year decline has been 14.2%.

Yet it finished positive in 35 of 46 years.

In 2020, stocks fell 34% during the year and still finished up 16%.

Pullbacks are going to continue to be common moving forward.

Ultimately, this is why we need to be able to evaluate stocks through the lens of sources of returns.

To put it simply, we need to assess if market pullbacks are due to:

1. Drops in valuation multiples (which often lead to opportunities)

2. Drops in earnings (which mean a decline in intrinsic value…(think Nike))

5. 🌡️ Sentiment History Says The Rally Isn’t Over

Investors often feel worst when future returns are most attractive.

What do the average S&P 500 returns over the following 12 months look like when sentiment peaks vs troughs?

• After sentiment peaks: +4.8%

• After sentiment troughs: +24.1%

September sentiment was just 48.1, which is the second lowest we’ve seen in the last 10 years.

6. 🌎 International Stocks Outperforming?

U.S. Stocks just went on a near 15 year run of outperformance relative to international stocks-

But international stocks have seen quite the rally over the last year.

If you’re looking for exposure to international stocks while getting a growing income stream, the Amplify CWP International Enhanced Div Inc ETF (IDVO) is one of my favorite options.

The ETF yields roughly 6%.

It only writes options on roughly 50% of the portfolio, allowing the ETF to take substantial part in the upside of its underling holdings.

This is why the price return over the last year it around 12.3%, but total returns are closer to 19.3%.

This low portfolio options coverage ratio is also the reason the fund has been able to grow its distributions over time-

As the fund continues to grow its NAV over time.

I interviewed the fund manager for this ETF a couple of months ago, which you can view here.

7. 🎯 Concentrated Growth

While the underlying theme of all these charts is that earnings growth for the market has been exceptionally strong-

That growth has been quite concentrated as of late.

Look at Q3 2026 consensus estimates for year-over-year earnings growth:

All 11 sectors are expected to grow earnings, but only four sit above the S&P 500’s overall growth rate shown in this chart.

Of course, these are consensus estimates.

Earnings season will show how much of that expected growth actually arrives.

💡 What’s The Takeaway?

There’s one thing that is abundantly clear:

The market is expected to grow earnings at a record rate, and it is priced accordingly.

A failure to meet those EPS expectations would likely cause a substantial drop in valuation multiples.

Higher bond yields also mean we need to be more selective about where we put new capital to work.

Two weeks ago, we added new positions to both our Dividend Growth Portoflio and High Yield Portfolio, which you can read about here.

If you’d like to get access to these portfolios, as well as everything mentioned below, you can do so here:

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Check out these resources:

Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

This is the end result of 100’s of hours of research every month.

It’s time to dive in.

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1. 📊 S&P Global (SPGI)

S&P Global is now down around 26% so far in 2026.

This sell off has caused a stock that has historically traded at a premium, to now be at it’s lowest valuation multiple in the last 5 years.

Meanwhile, its Ratings and Indices businesses just reported revenue growth of 17% and 20%, respectively.

That’s a pretty significant disconnect between the stock price and the performance of two of its most valuable businesses.

The primary concern behind the recent selloff is that the market sees the potential that AI could disrupt the financial data business.

As AI tools become more capable of analyzing companies and building models, investors are questioning how much customers will continue paying for platforms like Capital IQ Pro.

Of course, that is something worth watching closely.

But… The concern is being applied too broadly across S&P Global’s business, and the math reveals this clearly.

Look at the business segments for S&P Global:

• Ratings: Companies and governments pay S&P to evaluate the creditworthiness of their debt.

• Indices: S&P creates benchmarks such as the S&P 500 and earns licensing fees from ETFs, derivatives, and other products tied to those indices.

• Energy: S&P provides commodity price assessments, benchmarks, data, and research used throughout energy markets.

• Market Intelligence: S&P sells financial data, analytics, research, and software, including Capital IQ Pro, to financial professionals.

Market Intelligence faces the most direct questions about AI competition.

But here’s what’s so interesting-

The ratings and indices portion of the business is worth roughly what the entire stock is currently trading for.

The multiples are based on business quality, growth, and comparable companies.

For Ratings, Moody’s provides a useful comparison.

For Indices, MSCI provides a benchmark for valuing an established index business.

Energy and Market Intelligence receive lower multiples of 20 times, reflecting slower assumed growth and lower margins, with additional competitive uncertainty surrounding financial research tools.

Under those assumptions, the estimated values are:

• Ratings: $276 per share

• Indices: $101 per share

• Energy: $79 per share

• Market Intelligence: $107 per share

Ratings and Indices alone total approximately $377 per share, nearly matching SPGI’s current price.

Including all four divisions and subtracting net debt produces an estimated equity value of roughly $525 per share, or about 35% upside.

Ironically enough, this is nearly identical to the average price target from Wall Street analyst right now.

As a side note, keep a close eye on the ratings business.

Debt issuance by hyperscalers has surged to astronomical levels in 2026-

And SPGI will continue to be a major beneficiary of this trend.

2. 🏬 Agree Realty (ADC)

REITs have been hammered in the last few months, and it isn’t hard to spot why.

Treasury yields, particularly the 10YR yield have surged in the last month.

Higher treasury yields give income investors a more competitive alternative to dividend stocks while also increasing financing costs for REITs.

But ADC’s ability to grow its AFFO per share at a strong rate even in this environment is interesting, especially considering it’s yield is now roughly 5% and the valuation has hit attractive levels.

I recently interviewed CEO Joey Agree (which will be posted to the Mispriced podcast in the next few days), and we spent quite a bit of time discussing this.

With that being said, let’s start with the properties.

ADC owns retail real estate leased to companies such as Walmart, Tractor Supply, Dollar General, and Hobby Lobby.

Under its net leases, tenants generally cover property taxes, insurance, and maintenance.

The portfolio screenshot shows 2,825 properties as of June 30, with investment-grade tenants accounting for 65.8% of annualized base rent.

Walmart is the largest tenant at 5.8%, while no other tenant accounts for more than 5%.

That gives ADC a much more diversified income stream backed by familiar retailers.

And the recent results show continued growth.

Second-quarter adjusted funds from operations, or AFFO, increased 7.4% per share. Management also raised full-year guidance to $4.57–$4.59 per share.

Ultimately, growing AFFO per share is what allows and leads to dividend growth.

When I interviewed CEO Joey Agree, I asked what level of dividend growth over the next five years would excite him.

He stated he would be disappointed if the company could not grow its dividend by 20% to 25%.

If the dividend ends up 20% to 25% higher after five years, that translates into approximately 3.7% to 4.6% annualized growth.

Now we use that data to model out upside via a reverse dividend discount model.

The market is currently pricing in 3.6% dividend growth moving forward.

Even based on the lower assumptions from Joey Agree, it appears there is upside with this REIT-

And with very little debt coming due over the next 1.5 years, refinancing debt at higher rates is not a risk in the short term the way it is for other REITs.

Make no doubt about it, REITs in the short term will continue to have to compete with the 10YR Treasury, so this is more of a mid to long term income play.

3. ♻️ Waste Management (WM)

Waste Management is trading at its lowest price-to-free-cash-flow multiple in over five years.

This is a business that has typically traded at a premium for two primary reasons:

1. Approximately 75% of revenue has annuity-like characteristics.

2. Recession proof cash flows

WM collects, transports and processes waste through its network of trucks, transfer stations, landfills and recycling facilities.

Businesses and households continue to need these services regardless of where inflation or interest rates are heading.

Of course, economic conditions still affect waste volumes and operating costs-

But the underlying need for the service is difficult to disrupt.

Even through the lens of AI, WM is still interesting.

Waste still has to be physically collected and processed, while better routing and automated recycling equipment can help WM operate more efficiently.

The opportunity is to make an essential physical service more productive.

In the recent quarter, management slightly reduced its revenue outlook due primarily to lower volume expectations, but maintained its full-year free cash flow outlook of $3.75 billion to $3.85 billion.

The yield is approximately 1.87% at current prices, but predictable dividend growth is the obvious attraction.

WM increased its quarterly dividend from $0.825 to $0.945 in 2026, a 14.5% increase.

With its price-to-free-cash-flow multiple sits roughly 35% below its five-year average, making WM quite interesting.

Now, let’s jump into this month’s full list.

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A database that tracks in-depth data on these high yielding ETFs to help you make the best decision possible.

And last month, we officially released our European version!

This database is currently tracking over 83 funds-

With 56 of them being from IncomeShares!

Over the past few months, we’ve expanded our educational coverage on these assets to make sure investors have a clear understanding of how they work.

We’ve covered topics like:

• What is a Covered Call option

• The difference between ETFs vs ETPs

While also diving closer into subjects like portfolio options coverage, and how volatility impacts distributions for these funds.

And today, we’ll be diving deeper into another important topic that impacts your distributions:

Option Moneyness.

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🧩 IncomeShares

The ETF issuer IncomeShares has grown rapidly in popularity over the last few years.

IncomeShares is a European provider of high-yield exchange-traded products designed to generate monthly income through options strategies.

IncomeShares offers a range of European-listed options income ETPs, including funds tied to:

• Stocks

• Commodities

• Real Estate

• Treasuries

  

Many of these assets have little to no yield.

However, through an options strategy, IncomeShares is able to generate yields of often north of 10% on these assets.

Let’s use these funds as an example of how option moneyness works.

Thanks to IncomeShares for sponsoring this educational breakdown.

🏦 TLTY: Out-of-the-money calls on Treasury bonds

The IncomeShares 20+ Year Treasury Options ETP (TLTY) holds exposure to TLT, an ETF that owns long-term U.S. Treasury bonds.

TLTY then sells out-of-the-money call options on TLT to generate additional income.

Let’s walk through an example of how option moneyness works with TLTY.

Suppose TLT trades at $100 and TLTY sells a call with a $105 strike price.

The option is out of the money because TLT would need to rise 5% before reaching that strike.

TLTY collects a premium when it sells the call and can still participate in TLT’s price gains up to $105.

Gains above that level are limited by the option.

The income comes from the call premium, but the strike price determines how much of that rally the strategy can actually capture.

If bond prices fall instead, the premium may cushion some of the loss, but it does not eliminate it.

🥇 GLDI: In-the-Money

The IncomeShares Gold+ Yield ETP (GLDI) currently sells out-of-the-money calls on GLD. But changing the strike in a hypothetical example shows what an in-the-money call would do.

Suppose GLD trades at $100.

A call with a $105 strike is out of the money and leaves room for GLD to rise before the option limits further gains.

A call with a $95 strike is in the money because its strike is already below GLD’s market price.

The $95 call would bring in a larger premium.

At least $5 of that premium, however, reflects value the option buyer could receive immediately by purchasing GLD below its current price.

If GLD remained above $95 through expiration, the strategy would give up its price gains above $95.

The larger cash payment would therefore come with much less participation in a gold rally.

GLDI is not described as selling in-the-money calls today.

Its actual out-of-the-money approach accepts a smaller option premium in exchange for retaining more potential upside in GLD.

⚖️ Which is Best?

So which of these strategies is best?

Like almost always in the world of finance, it depends.

Both strategies have pros and cons.

As you explore your options in the income space, it is imperative you understand each funds underlying structure.

This is why we spend so much time on education and building tools to analyze these funds.

As a reminder, members of Dividendology get access and updates to the Dividendology Covered Call ETF Database as well as the European Option Income ETF Database.

Like always, if you want to get access to the Dividendology Database, as well as all the features mentioned below, you can do so here:

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Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

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Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

So far, I’ve been very pleased with the way these portfolios are shaping up.

Our Dividend Growth Portfolio currently has much stronger fundamentals than the S&P 500-

While trading at a more attractive valuation relative to its expected earnings growth.

The companies we own are growing faster and generating higher returns on invested capital than the broad market.

Meanwhile, our High Yield Portfolio is producing a 9.32% yield on our invested cost, while also seeing share-price appreciation.

Seeing dividend growth from our holdings, alongside improving durability in the underlying businesses, gives me greater confidence in the sustainability of our income.

Today, we’re adding one position to the Dividend Growth Portfolio and one position to the High Yield Portfolio.

Let’s dive in.

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📊 Market Update

It’s no secret that market valuations have reached historically expensive levels.

Regardless of whether you are looking at the P/E multiple, Price to sales, price to book, or any other standard valuation metric, we are at all-time highs.

Of course, you know this doesn’t tell the whole story.

We’re currently in the midst of one of the greatest earning booms of all-time.

So we have to consider how quickly the underlying earnings are expected to grow.

So when we look at the valuation of the market on a price-to-earnings-growth basis (PEG), things seem much more reasonable.

This is based on analyst earnings projections over the next 5 years.

But if we look even closer, even that doesn’t paint the full picture.

This is a sharply divided market, with very different results across sectors.

Take a look at the one-month performance by sector below.

Between August 24 and September 24, technology rose 8.14%, while the S&P 500 ETF in the comparison gained just 0.46%.

Other than communication services, every other sector ETF was down.

Industrials fell 5.68%, real estate declined 8.12%, and utilities dropped 8.93%.

Technology is single handedly pushing the market higher.

so does that weakness from sectors outside of tech create opportunities?

Maybe… But it depends.

Take a closer look at the valuation comparison by sector below.

Industrials trade at 23 times forward earnings.

Their valuation relative to the S&P 500 sits in the 97th percentile of the past 30 years.

Technology, meanwhile, trades at 20 times forward earnings, with its relative valuation in the 42nd percentile.

At current levels (compared to their history), industrials are expensive, while tech is cheap.

This is why we need to evaluate each opportunity on its own fundamentals.

A sector can sell off and still carry a demanding valuation, while strong earnings growth can make another sector’s multiple easier to justify.

Treasury yields are also changing the math behind the decisions we make when considering income opportunities.

The 10-year Treasury yield hit 5.2% today, its highest level since 2007.

Higher Treasury yields raise the bar for dividend stocks, preferred shares and REITs.

A company’s ability to grow cash flow and dividends becomes an increasingly important part of the investment case.

I believe today’s additions can take advantage of this environment while becoming positions we can hold for the long term in their respective portfolios.

If you’d like to get access to these portfolios, as well as everything mentioned below, you can do so here.

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Now, let’s get into our two additions.

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That is a 30x increase!

Of course, a large portion of this growth is coming from ‘option income ETFs’.

Investors are starved for high yield opportunities.

However, not all covered call ETFs are created equal.

In fact, as I’ve tried to warn many times before-

Many covered call ETFs are incredibly dangerous.

Even funds that have historically had periods where they performed very well can be structured in a way where that performance will certainly NOT last.

Take YieldMax’s MSTY for example.

This fund was considered (by some) to be the gold standard for covered call ETFs just last Summer.

However, after just a few months, the fund:

• Saw the share price decline by 80%+

• Saw distributions fall by around 85%+

As a result, investors began fleeing this fund at the beginning of this year.

This type of performance can be devastating to those looking to utilize the distributions as a sustainable form of income.

As we continue to build out our High Yield Portfolio on Dividendology.com, we must avoid this type of performance from any funds we add to our portfolio.

Today, we will be looking at the 4 Highest Yielding Covered Call ETFs with No NAV decline, and then assessing if that performance is actually still sustainable.

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📊 Dividendology Database

I recently updated the Dividendology Covered Call ETF Database (and added a European Option Income Database as well), adding more data to actively track performance.

We are currently actively tracking over 70 different ETFs in the database.

Out of the 70 ETFs in this database, less than 40% have actually grown their NAV over the last year!

Most covered call ETFs are simply liquidating themselves to make payments.

My ideal option-income ETF would accomplish three things:

1. Generate meaningful and reasonably sustainable monthly cash flow.

2. Preserve or grow NAV over time.

3. Retain at least some participation in the upside of its underlying holdings.

Let’s review the top performing covered call ETFs in the last year.

1. 🥇 QYLG - Global X Nasdaq 100 Covered Call & Growth ETF

The Global X Nasdaq 100 Covered Call & Growth ETF, ticker QYLG, was the highest-yielding fund in this screen that also produced positive one-year NAV growth.

This one is certainly less popular than most Covered call ETFs at just $129M AUM, but has a unique structure that allowed it to perform very well over the last year.

The fund owns the companies in the Nasdaq-100 and writes call options on approximately 50% of the portfolio.

I’ve touched on this many times before, but it’s worth explaining again.

Covered call ETFs generate income by selling call options on the assets they hold.

If the NAV shrinks over time, the ETF has fewer assets to write calls on.

Fewer assets = lower premiums = smaller dividend payments.

Here’s how this actually works and why NAV growth is so important:

1. More income potential: A rising NAV gives the fund more assets to write calls against, which increases the size of future dividends.

2. Protection against erosion: If NAV falls too far, the ETF can’t recover during market rallies, because the calls it writes cap the upside. This is a big one, and it creates what I call “NAV bleed.”

Because QYLG has 50% of its portfolio uncovered, half the portfolio retains its full upside exposure.

This creates a middle ground between owning the Nasdaq-100 outright and writing calls against the entire portfolio.

In other words, QYLG is designed to operate best in bull markets.

QYLG can participate more fully in the appreciation of companies such as Nvidia, Apple, Microsoft, Amazon, Alphabet and Broadcom.

As of August 31, 2026, information technology represented 58.7% of the portfolio, so this is still a technology-heavy investment despite its income focus.

QYLG’s distribution history also contains several unusually large payments around year-end.

To avoid being taxed at the corporate level, the fund must distribute at least 90% of its taxable income and realized capital gains to shareholders each year.

So when a fund like QYLG has a great year and has realized gains, they typically have to make an end of year distribution.

But keep in mind, when a fund makes a large catch-up distribution, the NAV drops by that same amount because distributions are paid out of the fund’s assets.

So, while investors receive the cash, the share price adjusts downward.

It’s the same total value, just shifted from NAV into your pocket.

The more important question is what happens to NAV after those payments.

QYLG’s partial option coverage gives it a better opportunity to rebuild NAV during strong Nasdaq rallies, although it also provides less option premium and less downside cushioning than a fully covered strategy.

QYLG may be the most growth-oriented fund on this list.

Its main risk is that the attractive recent result depended heavily on a strong period for mega-cap technology.

A weaker Nasdaq environment would test how well the distribution holds up.

2. 💻 KQQQ - Kurv Technology Titans Select ETF

The Kurv Technology Titans Select ETF, ticker KQQQ, was the second-highest-yielding fund to pass the screen.

It offered a 16.06% yield, but its NAV increased by just 0.02% during the previous year.

Technically, that qualifies as positive NAV growth.

KQQQ is an actively managed fund that concentrates on a group of high-conviction technology companies while using options to generate monthly income.

Its calls are generally written out of the money, allowing the underlying holdings to appreciate before the strike price begins limiting additional upside.

However, the fund runs close to 100% portfolio coverage, so most of the portfolio is still subject to an upside cap.

The fund seeks exposure through a combination of technology stocks, derivatives and underlying Kurv ETFs.

This creates a more concentrated and complicated structure than simply owning the Nasdaq-100.

For reference, Google, Amazon, and Broadcom make up almost 30% of the underlying holdings.

KQQQ can benefit when its selected technology companies outperform, but it therefore also carries greater security-selection risk.

KQQQ is the most expensive fund in the group.

It has a 0.99% expense ratio in the database.

That expense ratio is nearly three times QYLG’s, creating a higher hurdle before shareholders receive any return.

Time will tell if the stock selection process will pay off for the fund.

The 16.06% yield is obviously attractive, and out-of-the-money calls provide more breathing room than at-the-money calls.

Still, the combination of nearly full option coverage, concentrated technology exposure, a small asset base and a high expense ratio makes KQQQ the fund I would watch most carefully for future NAV erosion.

3. 🏢 IWMI - NEOS Russell 2000 High Income ETF

The NEOS Russell 2000 High Income ETF, ticker IWMI, offers a very different type of exposure.

Instead of relying on the mega-cap technology companies that dominate the Nasdaq-100, IWMI invests around the Russell 2000 small-cap universe and overlays an actively managed call-option strategy.

Its yield was 14.13%, and its NAV increased 2.27% during the previous year.

Like most NEOS funds, this ETF has become quite popular, with approximately $1.29 billion in assets and a 0.68% expense ratio.

One of the huge advantages most NEOS funds offer is NEOS tax efficiency.

IWMI uses Russell 2000 index options that are treated as Section 1256 contracts, which generally receive 60% long-term and 40% short-term capital-gains treatment regardless of holding period.

The managers may also use tax-loss harvesting when opportunities arise.

We will see a great example of this with our next ETF below.

IWMI generally writes out-of-the-money calls on approximately 75% to 90% of the portfolio-

So the Russell 2000 can rise to the strike price before the options begin limiting additional upside. Because part of the portfolio can remain uncovered.

Obviously, investors need to be comfortable with the Russell 2000 itself, which contains smaller, less profitable and often more economically sensitive businesses than the S&P 500 or Nasdaq-100.

Keep in mind, the S&P 500 has led on risk-adjusted returns since 1994…

But if small caps have more volatility, it can lead to more option premium, increasing distributions.

4. 🚀 QQQI - NEOS Nasdaq-100 High Income ETF

The NEOS Nasdaq-100 High Income ETF, ticker QQQI, applies a similar framework to large-cap growth stocks.

QQQI seeks high monthly income, tax efficiency and some upside participation.

Like IWMI, it uses index options treated as Section 1256 contracts and may use tax-loss harvesting.

The primary difference is the underlying portfolio.

QQQI provides Nasdaq-100 exposure, giving investors a heavy allocation to large technology and growth companies.

The Dividendology database showed a 14.02% yield and 1.88% one-year NAV growth.

QQQI had approximately $15 billion in AUM, making it dramatically larger than the other three funds in this screen.

I think it is also worth pointing out that QQQI also demonstrated an important characteristic during the 2025 tariff-related selloff.

Its share price fell with the Nasdaq-100, but it recovered rather than remaining trapped in a pattern of permanent NAV erosion (which is common for many of these funds).

Again, one of the huge advantages is from a tax perspective.

So for example of how this actually plays out, I did an in-depth analysis of Nasdaq income ETFs a few months ago, including NEOS’s fund QQQI.

On an assumed $80,000 of annual income, the model shows QQQI and GPIQ owing far less current federal tax than JEPQ because a large share of their distributions is classified as return of capital.

QQQI shows $8,770 in modeled current tax savings versus W-2 wages, followed by GPIQ at $8,116 and JEPQ at $280.

Return of capital generally reduces an investor’s cost basis, so these figures describe current tax deferral rather than permanent tax savings.

Keep in mind, these numbers can change over time.

Compared with QYLG, QQQI generally uses a more extensive and actively managed option overlay.

QQQI writes out-of-the-money calls on close to 100% of the portfolio, while QYLG writes at-the-money calls on only 50%.

QYLG therefore leaves more of its portfolio completely uncapped.

QQQI gives the Nasdaq-100 some room to appreciate before reaching the option strikes, but nearly all of the portfolio is subject to those strikes.

The choice between QYLG and QQQI depends on what an investor values more.

⚡ High Yield Portfolio

Last year, we began the process of building out our real money High Yield Portfolio.

So far, the performance has been very strong.

We currently own one option income ETF in the portfolio, that I think is far better than all of the funds mentioned above.

It has a double digit yield, positive NAV growth, and even grows distributions over time!

If you want to be a part of the process of building these portfolios and also get access to everything mentioned below, you can join here:

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Here’s everything you’ll get as a paid Dividendology member 👇

• 📊 Full Access to the Dividendology Database
  Built with over $10,000 invested in tools and research, this powerful database tracks dividend stocks and alternative income assets like Covered Call ETFs, REITs, and BDCs.

• 📈 The Dividend Growth Portfolio
  A real-money portfolio built from scratch, focused on long-term wealth creation and building a rapidly growing stream of dividend income

• 💸 The High Yield Portfolio
  A real-money portfolio, designed to generate massive sustainable income with an average yield of 8%+

• 📉 Running List of Undervalued Dividend Stocks
  Updated regularly — stay ahead with a curated list of the most attractively valued dividend opportunities in the market

• 🧠 In-Depth Research & Reports
  Deep dives into dividend stocks and income strategies you won’t find on mainstream platforms

Check out these resources:

Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

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🧾 List of Most Upside Dividend Stocks

Every month, I compile data on the dividend stocks with the most upside based on Wall Street analysts price targets.

Members will get access to the full list every month, as well as all other Dividendology features.

This month, we had the most stocks ever show up on the list at 88.

Let’s dive in.

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1. 🌐 Cisco Systems (CSCO)

Wall St. Price Target: $140.80 | Upside: 29.88%

Want to see a frightening chart?

U.S. stock market valuations are at all-time highs based on nearly every imaginable metric.

Of course, this doesn’t tell the full picture at all.

When we look at the market by sector, the valuation story looks different.

The Goldman Sachs exhibit below focuses on one measure, consensus forward 12-month P/E, rather than an average of eight measures across the whole market.

Here’s what most wouldn’t expect:

Industrials are trading at one of their most expensive valuations ever-

Meanwhile Information Technology trades at 20 times forward earnings, and at the 44th percentile of its 10-year history and the 54th percentile of its 30-year history.

With that being said, Cisco is in a much different scenario.

Why?

Because the P/E multiple has expanded dramatically over the last 3 years.

Let’s see if we can back into why it made it onto this months list of most upside Wall Street stocks.

For years, the basic appeal of Cisco was a large networking business generating cash and returning much of it to shareholders.

But that brings us to what is changing inside Cisco.

The buildout of AI data centers is creating demand for the networking equipment that moves enormous amounts of data among chips, servers and facilities.

The scale of the change is already visible in Cisco’s orders.

1. Fiscal fourth-quarter product orders grew 35% from a year earlier

2. Even after excluding hyperscale cloud customers, orders increased 25%

3. Networking revenue grew 28%, helping total quarterly revenue rise 18% to $17.3 billion

Cisco also received $4 billion of AI infrastructure orders in the quarter, bringing its fiscal-year total to $9.3 billion.

"With the breadth and depth of our portfolio and our competitive differentiation in secure networking, Cisco is well positioned to support our customers however or wherever they decide to deploy AI." - Chuck Robbins, Chair and CEO of Cisco

Cisco expects total fiscal 2027 revenue between $72.2 billion and $73.4 billion, up roughly 15% at the midpoint from the $63.3 billion it reported in fiscal 2026.

That is significant growth for a business of its size.

The question is whether Cisco can preserve its economics as AI hardware becomes a bigger share of sales.

The dividend is sitting at a 1.52% yield with an FCF payout ratio of 51.3%.

Keep in mind, Cisco uses about twice as much capital to buyback shares vs dividends.

Add those together, and nearly all of the year’s free cash flow went back to shareholders.

As mentioned above, Cisco is trading well above its historic valuation multiple.

But if Cisco hits their projected EPS estimates according to analysts and also sees a serious pullback in the P/E multiple, there is still upside at current levels.

2. 🏗️ Brookfield Infrastructure (BIP)

Wall St. Price Target: $47.83 | Upside: 34.17%

Brookfield Infrastructure looks like a utility stock on the surface level, but its business reaches far beyond electric and gas networks.

It also owns transportation assets, pipelines, fiber networks and even data centers.

Many of these businesses earn revenue through long-term contracts or regulated rates, giving Brookfield a base of cash flow from assets that are difficult to replace.

The company is currently yielding slightly over 5%, with historical dividend growth rates ranging between 6% - 7%.

The second-quarter results show that Funds from operations, or FFO, increased 10% to $702 million, while FFO per unit rose 10% to $0.89.

There is one obvious segment that stand out from the recent quarter:

The next opportunity is AI infrastructure.

Brookfield was selected to develop a Kentucky data-center campus with partners, announced a planned 200-megawatt computing project in South Korea and expanded its Bloom Energy power framework to $25 billion of potential capital spending.

Of course, this does not automatically translate into a certain level of earnings-

But management does say it will commit significant capital only after securing suitable commercial terms and returns.

Keep in mind that the 5% yield is based on that fact that they use around 81% of AFFO to pay the distribution.

BIP is currently trading below it’s 5YR average AFFO per share multiple.

3. 💳 American Express (AXP)

Wall St. Price Target: $380.41 | Upside: 22.74%

Did you know American Express is a stock Warren Buffett added to his portfolio in 1991, and has still never sold?

It’s currently Berkshire Hathaway’s 2nd largest position.

With that being said, this is a business model that is still often misunderstood.

The chart below shows Amex connecting cardmembers with merchants and using airline, hotel and retail partners to make its cards more useful.

Amex earns discount revenue when members spend, annual fees on many premium cards and interest when borrowers carry balances.

Rewards, customer service and technology are the substantial costs.

This is why the model actually differs from Visa and Mastercard.

Those companies run payment networks, while banks generally issue their branded cards and make the loans.

Amex runs a network and issues many cards itself.

It can earn revenue from both spending and lending, but it also bears the credit losses when its borrowers fail to pay.

With that being said, let’s assess the data from the recent earnings report.

Cardmember spending grew 9%, its fastest currency-adjusted growth rate in three years, and earnings per share rose 11% to $4.53.

Management also raised its 2026 revenue-growth forecast to 10%.

The economics of a premium member are the part you should be watching closely.

Net card fees rose 15% to $2.86 billion, while variable customer engagement costs, including rewards and services, rose 17% to $8.76 billion.

Those figures are not a profit calculation: Amex also earns revenue when members spend.

But adding fee-paying customers creates value only if their fees and spending ultimately justify what Amex spends to attract and retain them.

If engagement costs keep outpacing fees without a matching lift in merchant revenue, earnings could end up falling short of what Wall Street’s expectation are.

Amex currently has a yield of 1.22%, but an incredible 5 YR dividend CAGR of above 15%!

From a valuation perceptive, they currently trade right in-line with their historic valuation multiples.

With EPS growth estimates currently sitting at around 14% over the next few years, AXP is an example of a quality stock trading at a fair valuation.

Wall Street currently has an average price target of $380.41, or roughly 22% upside from currently prices.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

As a reminder, this list is updated monthly, and is always available on Dividendology.com by visiting our database.

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One that generates MASSIVE dividends day after day.

Dividends are, of course, the most passive form of income all time.

For example, when you buy the S&P 500, you have roughly 28.9 million employees working at all hours to maximize shareholder value.

Today, we will review the 10 principles you MUST understand to turn your portfolio into a Dividend Kingdom in 2026-

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1. 🏅Dividend Growth Outperforms

The most in depth research study on dividend growth stocks was recently performed by Hartford Funds.

One of the main takeaways?

Stocks that grow their dividends have historically outperformed.

But the study doesn’t just stop there.

Dividend growth stocks not only outperformed, but also outperform while seeing lower levels of volatility.

Buy stocks that grow dividends.

2. ⚖️ Capital Allocation

The reason for this outperformance from dividend growers isn’t technically because they grow dividends-

It’s because of wise capital allocation, leading to growing free cash flow.

Don’t make the mistake of assessing the quality of a dividend stock without assessing the quality of their free cash flow.

Remember, the most important task of management is allocating capital.

In general, management has five options:

1. Reinvest back into the business

2. Pay down debt

3. Mergers & acquisitions

4. Buyback shares

5. Pay out dividends

Management’s goal is to maximize shareholder value.

They must determine how to do that through proper capital allocation.

If management uses all of its capital to payout dividends, there is no capital left over to pursue the other four options.

3. 💵 Show Me the Free Cash Flow!

Based on the capital allocation chart we can see above-

Dividends are not free money.

They are paid out of free cash flow.

Let’s look at the example below.

Above, we see three example stocks listed with their 2025 dividend per share listed and their 2025 free cash flow per share listed.

When someone asks-

‘How much do your stocks earn for you?’

Most people answer with how much they pay them in dividends.

This technically isn’t correct.

The real answer should be how much they generate for you in free cash flow.

While in the above example, those three stocks paid out a total of $1,652 in dividends-

They generated $5,291.34 in free cash flow.

This is the true measure of how much these stocks actually earned you.

Management is then left with the decision on how to properly allocate it to maximize shareholder value.

Proper allocation will lead to growing free cash flow, which leads to rapidly growing dividends.

4. 🛡️ Dividend Growth vs Inflation

A history of dividend growth isn’t good enough.

The reality is that if a stock is not growing their dividend at a rate above inflation, then the amount paid in dividends is technically shrinking.

This is detrimental if you are looking to one day live off dividends.

Look at Verizon’s dividend growth for example:

While Verizon has been growing dividends for over 20 years, the rate they grow them at is below the rate of inflation.

And of course, Verizon only has a total return of 62% in the last decade, due to slow free cash flow growth.

5. ♻️ Look for Sustainable Dividend Growth

Have you ever heard of the term ‘Sustainable Dividend Growth’?

It’s not a very common term.

It’s easy to be impressed by seeing large double digit dividend growth-

But that doesn’t tell you if that growth was sustainable.

Here’s the reality:

If a stocks grows dividends faster than the rate they grow free cash flow, then the free cash flow payout ratio increases.

This means that level of dividend growth is unsustainable.

Look at Zoetis for example.

Zoetis grew dividends over the last 5 years at a compounded annual growth rate of 16.22%-

But free cash flow only grew at 6.41%.

As a result, the free cash flow payout ratio climbed higher.

It isn’t enough to simply check for dividend growth.

It must be backed by growing free cash flow.

This is why I use automated sheets from Tickerdata to easily assess dividend sustainability.

6. ❄️ The Dividend Snowball

You’ve probably heard of the dividend snowball effect.

It’s the idea that as time goes on, your dividends get larger and larger due to compounding.

Dividend payments can grow from:

1. Contributing capital

2. Reinvesting dividends

3. Your holdings increasing dividend payouts

To maximize the dividend snowball, you need all three working together.

But remember:

Early on, dividend income grows mainly from contributing capital.

But as the snowball starts rolling, dividend income grows mainly from reinvesting dividends and your holdings increasing dividend payouts.

7. 📝 Track Your Portfolio

Everyone wants to live off dividends.

But if you aren’t actively:

• Tracking your dividends

• Tracking expenses

• Projecting what your portfolio will look like in the future

Then you have no idea if you are behind, ahead, or right on track to living off dividends.

And as a result, you have no idea if you should be pursuing more of a high yield strategy, or a primarily dividend growth strategy.

Here is an example of the Investment Dashboard from Tickerdata that you can use to track your portfolio:

8. 📊 Dividends Can Increase Total Returns

Did you know dividends have the ability to increase total returns?

Meta is a great case study of this.

Nearly 2.5 years ago, Meta announced plans to start paying dividends.

If we examine their financials, we see a company with exceptional profitability.

Meta was growing revenue rapidly and had a very strong balance sheet.

Yet, despite their financial strength, Meta faced a unique problem-

They had too much cash.

Over the past five years, Meta burned through $45 billion+ trying to build Reality Labs, their metaverse division, which turned out to be unprofitable.

This illustrates a critical point.

Even the best companies can misallocate capital if they reinvest too much without getting proper returns.

By choosing to pay dividends now, Meta is simply acknowledging they are generating too much cash to intelligently reinvest back into the business, so they now pay out a growing dividend.

If Meta would have paid out that $45 billion as a dividend instead of wasting it on a project with a negative return, it would have substantially increased their total returns.

Capital allocation is everything.

9. 💰 Know When & How to Pursue High Yield Investing

I love Dividend Growth investing.

But depending on your situation, it can sometimes make sense to pursue High Yield investing.

In the long term, Dividend Growth investing can generate more in dividends.

But in the short term, High Yield investing can generate far more income.

This sounds obvious, but have you ever thought about how powerful High Yield investing can be?

If you can achieve a sustainable yield of 8%, the amount of capital we would need to retire is cut in half. (based on the 4% rule).

We started building our real money High Yield Portfolio for members of Dividendology back in September of 2025.

So far, that portfolio has outperformed for the majority of 2026, while providing a sustainable yield of 9.32%!

You can read more about our High Yield Portfolio and its goals here.

10. 🌅 Enjoy the Ride

Have you ever heard the story of the Mexican fisherman?

If not, then you need to take 3 minutes to read it below. 👇

Perspective is everything.

💥 Want Access to More?

We are currently still building out our Dividend Growth and High Yield Portfolio on Dividendology.com.

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You can make a one-time investment, and get paid a growing stream of income for the rest of your life.

And on top of this?

Dividend growers have historically outperformed.

Today, we will be looking at the characteristics we need our dividend growth portfolio holdings to have in order for us to outperform over the long term.

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🧮 Sources of Returns

It’s always important to review the 3 potential sources of returns:

• Earnings per share growth

• Multiple expansion/contraction (Price to earnings ratio growing/shrinking)

• Dividends

For example, here is what the sources of returns look like for the S&P each decade:

Some decades (like the 2010s), earnings growth was the main driver of returns.

Some decades (like the 1980s), multiple expansion was the ultimate driver of returns.

And some decades, when market performance was particularly poor-

Dividends were the main driver of returns, and sometimes the only positive source of returns.

We must note that over the long run, share price follows earnings growth.

📈 Outperforming the Market

Many of the decades (not all) where the S&P 500 had above average returns were primarily driven by:

• Earnings growth

• Multiple expansion

These are the ultimate engines of market outperformance over the long term.

The math behind this is simple.

Let’s say we have a stock that grows earnings per share at 15% per year.

At a 15% annual growth rate, earnings would double in about 4.8 years

Assuming that:

• The stock doesn’t pay dividends

• The P/E multiple stays the same

This means that the share price of the stock over the 4.8 year time period would double as well.

A 100% gain in just 4.8 years!

But let’s run this scenario one more time…

This time we will assume the stock is trading at a price to earnings multiple of 15.

Like above the stock continues to grow earnings per share at a rate of 15%.

But at the end of the 4.8 year period, the company is trading at a P/E multiple of 25.

To review:

• EPS grows at 15%

• The P/E multiple expands from 15 to 25

This means the stock would provide a total return of 234% in just 4.8 years!

🛒 Walmart Case Study

Walmart is a great case study of ‘sources of returns’ right now, with the stock close to a 52 week low.

First, let’s make a simple acknowledgment:

Walmart is an excellent business.

The company generated more than $713 billion in fiscal 2026 revenue, $41.6 billion in operating cash flow, and $14.9 billion in free cash flow.

The underlying business continues to grow, produce stable cash flows, and gain market share-

And to some degree, could be considered ‘AI proof’.

From February 2016 through January 2026, Walmart delivered a total return of 542.2%, or approximately 20.6% annually!

However, look at where those returns came from:

• 104.1 percentage points from earnings growth

• 103.4 percentage points from dividends

• 334.7 percentage points from multiple expansion

Nearly 62% of Walmart’s total gain came from investors paying a higher valuation multiple for the same business.

Multiple expansion is easily justified if a company is significantly widening their MOAT or projected to grow earnings at a much faster rate in the future.

However, Walmart had climbed to a high P/E multiple of roughly 45x near the beginning of 2026.

The dividend also provided very little protection at that valuation, with the yield below 1% at and a 5 year dividend CAGR of roughly 6%.

Investors were receiving a sub-1% starting yield, moderate dividend growth, and an earnings yield of less than 3% based on the forward P/E multiple.

The result was Walmart significantly underperforming the broader market so far in 2026.

The underlying business is still performing well-

But the stock is underperforming because its elevated starting valuation left very little room for anything less than exceptional results.

Even when earnings and dividends continue growing, multiple contraction can overwhelm those operational returns.

This is why identifying a great company is certainly a great first step, but we must also understand what are their potential sources of returns moving forward.

Let’s look at a recent example where sources of returns worked heavily in my favor.

🏅Microsoft Case Study

Some may call it hindsight bias, but the easiest investment I ever made was when I made Microsoft my largest position back in 2022.

The reasons I had such high conviction on this investment, was because I was looking at Microsoft through the lens of what my potential ‘Sources of Returns’ were.

Let’s look at the history of MSFT.

From January of 2000 to 2010, MSFT stock declined by -47.7%.

However, during this time period, EPS grew from $0.89 to $2.13.

That means EPS grew at a compounded annual growth rate of 9.1%!

MSFT also started paying dividends in 2003, with an initial yield of 0.55%-

And grew the dividend at a 7.1% CAGR through 2010.

What does this mean?

Microsoft was providing double digit operational returns (Dividend Yield + Earnings Growth).

But the entire decade of returns was destroyed by multiple contraction.

The P/E multiple for MSFT was well over 50 at multiple points in the year 2000.

Buying stocks at an overvaluation can destroy decades of returns.

Compare this to my investment in MSFT in 2022 over a 3 year time period.

During this time, MSFT has grown EPS at a compounded annual growth rate of 12.7%.

The yield was above 1%, and grew at a near double digit rate.

They were providing a double-digit operational return annually.

But here’s what really made the difference.

MSFT was trading at its lowest PE multiple in over 5 years, at below 25.

Even if the PE multiple for MSFT remained unchanged-

I would still have gotten:

• 12.7% returns from EPS growth

• Over 1% returns from dividends (plus dividend growth!)

Near 14% returns annually.

But the market realized it’s mispricing of MSFT, and the PE multiple has climbed significantly.

This led to total returns of well over 100% in just a 3 year time period.

🔍 S&P 500 Sources of Returns

Shall we dive deeper into this concept?

The chart below is one of the most important charts you’ll see today.

It shows the underlying sources of S&P 500 returns since the beginning of 2020-

However, it shows the sources on a much more detailed level.

It shows exactly how and why earnings grew.

Through August 2026, the S&P 500 generated a cumulative real return of approximately 114%.

That means the return is adjusted for inflation.

The chart breaks that return into six components:

1. Organic sales growth: +27 percentage points

2. Margin expansion: +29 percentage points

3. P/E multiple expansion: +36 percentage points

4. Buybacks: +19 percentage points

5. Dividends: +14 percentage points

6. Share dilution: −11 percentage points

Together, these components explain the market’s approximately 114% inflation-adjusted return.

Two things immediately jump out.

First, look at what happened in 2022.

Fundamentals kept improving.

BUT-

The S&P 500’s cumulative real return since the beginning of 2020 fell from approximately 50% to nearly 13%.

Why?

Because the collapse was primarily caused by valuation multiple contraction.

Investors were suddenly willing to pay much less for each dollar of corporate earnings.

A company can continue growing sales, earnings, and dividends while its stock price falls because the valuation multiple contracts (like we saw above for Walmart).

This is one of the biggest advantages for dividend growth investing, particularly for retirement.

Your portfolio value can still decline significantly when valuations compress.

This is detrimental if you are planning to utilize the 4% rule.

However, if your living expenses are funded by a growing stream of dividends-

You are less dependent on selling shares at whatever valuation the market happens to assign them.

Basically, as we discussed last week, this alleviates you from sequence of returns risk.

But the second important takeaway is something we didn’t point out last week.

It’s the fact that P/E multiple expansion has been the single largest contributor to S&P 500 returns since 2020, adding approximately 36 percentage points.

At first, that sounds concerning (and to some degree it is).

Returns driven by multiple expansion are generally less durable than returns driven by sales and earnings growth.

Valuations cannot expand indefinitely, and the same force that boosted returns can eventually work in reverse.

But there has been meaningful fundamental growth supporting the market’s return.

The risk is that valuations are now placing greater demands on that future growth.

Of course, this brings us to the never ending debate as to whether or not we are actually in a bubble.

🫧 Is There a Bubble?

During the dot-com bubble, Cisco’s share price became completely disconnected from its forward earnings expectations.

Nvidia looks radically different.

Its share price has surged since 2020, but forward earnings expectations have risen alongside it.

Here’s the caveat to this:

If we are in a bubble today, it may be embedded in the earnings expectations themselves, not the price of the stock.

The market is assuming that AI demand, spending, margins, and earnings will remain extremely strong.

But if those expectations prove too optimistic, earnings estimates could decline while valuation multiples contract at the same time.

so if we look at this scenario through the lens of sources of returns, we would se a severe decline in the valuation multiple AND earnings.

This brings us back to the unique role of dividends.

Share prices, earnings expectations, and valuation multiples can change rapidly.

However, a well-covered dividend supported by durable cash flow is one of the most stable and predictable sources of returns.

Dividends provide a source of return that have proven to be incredibly reliable over the years.

Obviously that does not make every dividend safe.

But companies growing free cash flows with strong balance sheets, and healthy payout ratios can continue paying and growing their dividends while the market works through an earnings or valuation reset.

⚡Our Dividend Growth Portfolio

The goal of our Dividend Growth Portfolio?

Buy stocks that allow us to benefit from all 3 of the sources of returns.

If you want to be a part of the process of building this portfolio and also get access to everything mentioned below, you can join here:

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  A real-money portfolio built from scratch, focused on long-term wealth creation and building a rapidly growing stream of dividend income

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  A real-money portfolio, designed to generate massive sustainable income with an average yield of 8%+

• 📉 Running List of Undervalued Dividend Stocks
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1. 🌿 Innovative Industrial Properties (IIPR.PR.A)

Innovative Industrial Properties (IIPR) is a specialized REIT that owns cultivation and processing facilities leased to licensed cannabis operators across the United States.

The common stock still offers a very high yield, sitting at roughly 13.3%.

However, I’m not interested in the common stock here.

I’m far more interested in the preferred shares.

IIPR’s 9.00% Series A cumulative preferred shares currently offer a yield of roughly 9%, which is already attractive on its own.

But what makes it so attractive relative to the common stock is that the risk to reward is quite attractive.

The income from the preferred shares is backed by one of the more conservative balance sheets in the REIT sector.

IIPR ended the latest quarter at just 1.7x net debt to adjusted EBITDA, while the preferred dividend is covered roughly 16.6x by annualized AFFO.

That coverage ratio is lower than it was previously because IIPR has issued a significant amount of additional preferred stock, but it is still exceptionally strong-

And especially strong relative to the preferred stock of their peers.

That means the preferred dividend still has a very large cushion before it would come under meaningful pressure.

There have also been some encouraging developments on the tenant side.

One of the biggest recent updates involves the former PharmaCann facility in Hamptonburgh, New York, which was re-leased to Grown Rogue.

The PharmaCann facility had been one of the problem tenants investors were watching closely.

Re-leasing the property does not eliminate tenant risk across the portfolio, but it does show that IIPR has been making real progress repositioning troubled assets and replacing distressed operators with new tenants.

There was also an important new update on the preferred shares themselves from just earlier this month.

On September 1, 2026, IIPR filed an 8-K updating its at-the-market equity program.

The program continues to allow IIPR to sell both common shares and its 9.00% Series A preferred shares, with as much as $500 million of aggregate offering capacity.

IIPR is still actively preserving the ability to issue more of the 9% preferred stock.

Keep in mind, the preferred is already callable at $25.

If management were preparing to redeem the security in the near future, it would be somewhat unusual for the company to simultaneously maintain an active mechanism allowing it to issue even more shares of the same preferred.

In my view, this makes an imminent redemption look less likely, which is good news for those of us who want to collect the high yield.

The trade-off, of course, is that every additional preferred share increases IIPR’s fixed dividend obligation.

So if management continues issuing preferred stock aggressively, the preferred dividend coverage ratio will gradually come down.

This is something I will continue watching closely.

For now, though, the cushion remains substantial.

Based on the latest quarter, the preferred dividend is still covered roughly 16.6x by annualized AFFO, while leverage remains just 1.7x net debt to adjusted EBITDA.

And importantly, there has been no new preferred dividend reduction, call or redemption announcement, or major new tenant default.

So the thesis remains largely intact.

The cannabis industry remains volatile, and yes, IIPR still has tenant credit risk, and continued preferred issuance could eventually reduce the margin of safety.

But investors are still collecting around 9% annual income from a cumulative preferred security backed by a very lightly leveraged REIT with strong dividend coverage, while recent tenant developments are moving in the right direction.

The September ATM update actually strengthens one part of the thesis:

Management’s willingness to continue issuing the preferred suggests the company still views 9% preferred capital as useful, making a near-term call appear less likely.

In complete transparency, we added this position in March at $22.36 a share when the yield was over 10% (a CAGR of roughly 39%!!).

We are currently up roughly 17% on this position with a 10%+ yield locked in.

2. ⚡ Broadcom (AVGO)

I’ve been bullish on Broadcom for years, and despite the enormous run in the stock, I still think AVGO is one of the most interesting large-cap growth opportunities in the market.

The mistake investors often make is assuming that because a stock price has gone up significantly, the valuation must also be expensive-

But share price and valuation are not the same thing.

What matters is how quickly the earnings power of the business is growing relative to the stock price.

Broadcom’s forward normalized P/E has fallen to roughly 20.7x, its lowest level since 2024.

For context, the average multiple over the period shown above is roughly 29.9x, and at one point Broadcom traded near 49x forward earnings.

So even after a massive five-year run, the valuation today is much more reasonable than it was during much of the recent rally (since projected EPS growth is still so strong).

Analysts currently estimate EPS of roughly:

• 2026: $11.61

• 2027: $19.28

• 2028: $29.97

• 2029: $37.34

• 2030: $35.00

That works out to a projected EPS CAGR of roughly 31.8% from 2026 through 2030.

And the most recent quarter gave investors very little reason to believe the underlying growth story is weakening.

Broadcom reported Q3 non-GAAP EPS of $3.32, beating expectations, while revenue reached about $29.6 billion, up roughly 86% year over year. AI semiconductor revenue increased 221%, semiconductor solutions revenue grew 127%, and infrastructure software revenue increased 29%.

Broadcom has already generated roughly $31.9 billion in free cash flow through the first nine months of 2026, compared with about $26.9 billion in all of 2025.

As a result, the company’s 10-year dividend CAGR is roughly 26%, with the dividend growing from around $0.16 per share in 2015 to $2.42 in 2025.

So why did the stock sell off after earnings?

The main issue was Q4 revenue guidance of approximately $34.8 billion, slightly below the prior consensus of around $35 billion.

Selling off as a result of a slight quarterly miss is a big mistake.

Why?

Because management’s long-term outlook remains extremely strong.

Broadcom CEO Hock Tan said recently stated-

“We are very much on target to exceed $30 in earnings per share in fiscal 2028.” - Hock Tan

That is especially interesting because the current analyst estimate for 2028 is still below that level.

In other words, management is effectively signaling that Wall Street’s current earnings expectations may still be conservative.

The AI opportunity remains the primary growth engine, with Broadcom benefiting from huge demand for custom AI accelerators and networking infrastructure.

At the same time, VMware gives Broadcom a large recurring software revenue base.

That combination of explosive semiconductor growth and recurring software cash flow is extremely attractive.

For the sensitivity analysis, if we assume Broadcom grows EPS at 25% annually and eventually trades at a 30x P/E multiple… (both below current projected levels)

Under those assumptions:

2026: $348
2027: $435
2028: $544
2029: $680
2030: $851
2031: $1,063

From today’s roughly $366 share price, that would imply a total return of about 132% through 2030, or an annualized return of roughly 18.3%.

And even if we use a much lower multiple, the setup still looks attractive.

If Broadcom reaches roughly $30 in EPS by 2028, (as management stated they expect), and trades at only 20x earnings, that would imply a share price of about $600.

So our model is even conservative relative to management expectations.

That is the key reason Broadcom remains so compelling.

The stock does not need multiple expansion.

It simply needs the earnings growth story to keep playing out.

For long-term investors willing to tolerate volatility, I still think the combination of AI growth, recurring software revenue, enormous free cash flow, and exceptional dividend growth makes AVGO one of the strongest dividend growth opportunities in the market.

3. 🏦 Blackstone (BX)

Time to do something I’ve never done before-

Allow someone else to list a stock on my monthly list of undervalued dividend stocks.

For the final stock on this month’s list, I wanted to include an idea that actually came directly from David Bahnsen.

I recently had David Bahnsen on the Mispriced podcast.

He is the founder, managing partner, and chief investment officer of The Bahnsen Group, where his firm manages roughly $10 billion in assets, and he has spent decades investing through a dividend-growth framework.

At the end of the interview, I asked him the same question I ask every guest:

What is one equity you currently believe is mispriced?

His answer was Blackstone (BX).

Bahnsen acknowledged that Blackstone has already rerated higher from where it traded earlier in the year, but he still believes the stock remains mispriced.

His reasoning was fairly straightforward:

“Blackstone remains below its all-time high while continuing to grow its cash flow and distributions, yet the stock is still being hurt by negative sentiment surrounding private credit and alternative asset managers.” - David Bahnsen

I think that distinction is extremely important.

There is a difference between a business deteriorating and a stock being dragged down because investors dislike the industry it operates in.

Blackstone is the largest alternative asset manager in the world, with exposure across private equity, real estate, credit, infrastructure, and other alternative investments.

That creates an interesting setup because many investors currently hear words like “private credit” or “commercial real estate” and immediately become cautious.

And there are legitimate risks in those markets.

But negative sentiment toward an entire asset class can occasionally create opportunities in the highest-quality businesses operating within it.

Bahnsen’s argument is essentially that Blackstone’s underlying cash-generating power continues to improve even while the valuation reflects some of that broader skepticism.

• Blackstone reported 22% growth in fee-related earnings and 26% growth in distributable earnings in Q2.

• Distributable earnings came in at $1.52 per share, while fee-related earnings were $1.43 per share.

And one of the most important drivers is continued growth in assets under management.

As you can see in the image above, Blackstone’s fee-earning AUM increased from roughly $937.6 billion to $961.6 billion during the quarter, a gain of about 3%.

Blackstone aslo brought in roughly $43.3 billion of fee-earning AUM inflows, partially offset by about $12.6 billion of outflows.

That produced more than $30 billion of net flows during the quarter.

Private equity fee-earning AUM increased about 5%, while multi-asset investing grew roughly 8%.

Credit & insurance also posted strong inflows, while real estate was essentially flat.

This is the core of the Blackstone business model.

1. More capital comes into Blackstone.

2. That capital gets invested.

3. The company earns management fees on a larger asset base.

4. Successful investments can generate performance fees and realizations.

And over time, that strengthens the Blackstone ecosystem and helps attract even more capital.

In other words, fee-earning AUM has the ability to compound, and fee-related earnings can compound along with it.

There is also an interesting AI angle here with Blackstone.

Blackstone is obviously not a traditional AI stock, but it has become a major beneficiary of the infrastructure buildout.

Management said 9 of its 10 largest investment markups in Q2 were AI-related.

Its dedicated infrastructure platform appreciated 7.2% during the quarter and 29% over the last year, while its QTS data center business was the largest driver of appreciation across the firm.

This type of exposure is interesting, because Blackstone does not necessarily have to predict which AI model ultimately wins.

It can provide capital to the infrastructure behind the trend: data centers, private credit, private equity, real estate, and power-related investments.

At around the valuation referenced in the research, Blackstone was trading at roughly 22.5x forward earnings/distributable earnings, below its five-year average.

This is a business with nearly $1 trillion of fee-earning assets that is still producing double-digit growth in earnings and attracting tens of billions of dollars of new capital each quarter.

Now, let’s jump into this month’s full list.

Read more

The S&P 500 has gone through multiple extended periods of time where real returns were negative.

However, the typical response I see to the chart above is a massive mistake.

It usually goes something like this:

“This is cherry-picked data. If you simply dollar-cost averaged during this period, you still would have generated positive returns!”

That statement is absolutely true…

But it also misses the entire point of the chart.

Dollar-cost averaging can be incredibly powerful when you are still earning income and regularly contributing money to your portfolio.

But what happens when the paychecks stop?

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📉 The Lost Decade Was Real

From 2000 through 2012, the S&P 500 generated an average annual real return of approximately -0.8%, according to the data shown above.

This period included:

• The collapse of the dot-com bubble

• The September 11 attacks

• The 2008 financial crisis

• Two separate bear markets in which stocks fell by roughly 50%

• More than a decade of inflation eroding investors’ purchasing power

An investor who continued working throughout this period could keep buying shares at lower prices.

Every contribution purchased more shares while valuations were depressed.

When the market eventually recovered, those additional shares participated in the rebound.

That is exactly what dollar-cost averaging is designed to do.

But a retiree faced the opposite situation.

🏖️ What If You Retired in 2000?

Imagine retiring at the beginning of 2000 with what appeared to be enough money to fund the rest of your life.

You no longer have employment income coming in.

Instead of adding money to your portfolio each month, you must withdraw money to pay for housing, food, healthcare, travel, and other living expenses.

Then the market begins falling.

Your portfolio declines, but your expenses do not disappear.

You still need income, which means you may be forced to sell investments after their prices have already fallen.

When asset prices are depressed, you must sell more shares to generate the same amount of cash.

Those shares are permanently removed from your portfolio.

• They cannot generate future dividends

• They cannot compound

• And they cannot participate in the eventual recovery

The market may recover, but the investor may not.

⚠️ This Is Sequence-of-Returns Risk

Two investors can earn the same average annual return and experience completely different outcomes depending on when the positive and negative returns occur.

For an investor who is still accumulating assets, an early bear market can actually be beneficial.

New contributions purchase more shares at lower valuations.

For a retiree making withdrawals, an early bear market can be devastating.

Losses occurring during the first several years of retirement affect a larger portfolio balance.

When those losses are combined with regular withdrawals, the investor’s capital can become permanently impaired.

This chart shows how dramatically the timing of returns can affect a retiree.

Both portfolios begin with $1 million and experience the exact same returns.

The only difference is that the returns for the first and final years are swapped.

The portfolio beginning with a 29% gain finishes with more than $2.1 million.

The portfolio beginning with an 18% loss runs out of money after 17 years.

The deeper the early losses and the larger the withdrawals, the more difficult the recovery becomes.

This is why the order of your returns can matter just as much as your average return.

🔮 “Cherry-Picked” Is Only Obvious in Hindsight

Calling the year 2000 a cherry-picked starting point misses something important:

Real people invested real money in 2000.

This exact point came up during my recent interview with David Bahnsen, who manages over $10B of capital using a dividend growth strategy at The Bahnsen Group:

“I don’t understand why people think starting right before the cherry-picked notion of a dot-com blowup makes it invalid, as if there weren’t real-life people putting real-life money in at that time. It’s only with the gift of hindsight that we get to say, ‘That’s just because of the timing of the dot-com implosion.’ No one knows what the timing is.”

Nobody retiring at the beginning of that year knew they were approaching a 13-year period of negative inflation-adjusted returns.

Every disastrous historical starting point looks obvious in hindsight.

That is precisely why retirement plans should not depend on markets delivering their long-term average return on schedule.

The S&P 500 may generate attractive returns over several decades, but those returns do not arrive in a straight line.

You may experience an extraordinary period like 1985 through 1999, when the market produced average annual real returns of approximately 15.1%.

Or you may experience a period like 2000 through 2012, when inflation-adjusted returns were negative.

🧩 Not All Sources of Return Are Equally Dependable

This second chart is one of the most important charts you will see today.

It breaks down the true sources of the S&P 500’s inflation-adjusted return since the beginning of 2020.

Over that period, the S&P 500 generated a cumulative real return of approximately 114%.

That return came from six different sources:

1. Organic sales growth: +27 percentage points

2. Margin expansion: +29 percentage points

3. P/E multiple expansion: +36 percentage points

4. Buybacks: +19 percentage points

5. Dividends: +14 percentage points

6. Share dilution: -11 percentage points

The total return is certainly strong-

But the path taken to generate that return is even more important to understand, especially for someone depending on a portfolio during retirement.

Take a close look again at what happened in 2022.

Corporate fundamentals continued improving during 2022.

Sales grew.

Companies continued repurchasing shares.

Dividends continued accumulating.

Yet the S&P 500’s cumulative real return since the beginning of 2020 collapsed from roughly 50% to approximately 13%.

Why?

Because valuation multiples were crushed.

Investors became willing to pay substantially less for each dollar of corporate earnings as inflation surged and interest rates increased.

The underlying businesses did not suddenly lose most of the sales growth, dividends, and buybacks they had generated.

Short term, stock prices follow market sentiment.

Long term, stock prices follow earnings growth.

This is where dividend growth investing has some massive advantages.

Your portfolio value can still fall dramatically when valuations compress.

But if your living expenses are being funded by a sustainable and growing stream of dividends, you aren’t having to sell shares at whatever valuation multiple the market happens to assign them at a given point in time.

🚨 The 4% Rule is More Dangerous Than Ever

On a $1,000,000 portfolio, the 4% rule generates $40,000 in year one, then $41,200 in year two if inflation runs 3%, and so on.

The trinity study found this strategy worked more than 95% of the time on a 30-year retirement horizon.

That’s where the “95% success rate” you hear parroted everywhere comes from.

But here’s where things get interesting.

The 95% success rate is a historical average.

It blends together retirees who started in cheap markets with retirees who started in expensive ones.

And when you pull those two groups apart, the story changes dramatically.

Here’s the uncomfortable truth: every single historical failure of the 4% rule happened when stocks were expensive at the start of retirement.

So what does the success rate for the 4% rule look like when also accounting for valuation?

When the CAPE ratio is above 20, the historical failure rate jumps all the way to above 25%!

As a reminder, the CAPE ratio (Cyclically Adjusted Price-to-Earnings) is one of the most widely used ways to measure how expensive the stock market is.

Instead of looking at just one year of earnings like a normal P/E ratio, CAPE looks at the average of the past 10 years of earnings, adjusted for inflation.

So where is the CAPE ratio today?

Sitting at 42.04.

The CAPE ratio is the second highest it has ever been, second only to the dot com bubble.

In other words, we are sitting in exactly the valuation range where the 4% rule has historically broken down.

We don’t even have enough historical data to know what the success rate of the 4% rule would be in this valuation range.

💵 Dividends Are Predictable

This Texas Instruments chart provides a perfect real-world example of why I believe growing dividends can provide a more predictable foundation for retirement income.

• The gray portion represents the value of Texas Instruments’ annual share repurchases per share

• The blue portion represents dividends paid per share

I’m a big fan of share buybacks when performed correctly. (That’s a conversation for another day)-

But the simple reality is that Texas Instruments’ buybacks have fluctuated dramatically from year to year.

This tends to be the case for most stocks.

Dividends are by far the most predictable source of return, making them optimal for living off dividends, even during market downturns.

🎯 Build Income Before You Need It

The next lost decade will only be obvious in hindsight.

That is why Dividendology focuses on finding sustainable income supported by durable cash flows, healthy balance sheets, and responsible payout policies.

Members receive access to our model portfolios, complete holdings, trade alerts, in-depth research, and proprietary REIT, BDC, and options-income fund databases.

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Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

A research tool providing in-depth information you can’t find on traditional softwares, that shows key information on how option-income funds are structured.

Here’s a small snippet:

But one question has continued to come up:

“When will Dividendology create a database for European option-income ETFs and ETPs?”

Today, I’m excited to officially release the Dividendology European Option Income ETF & ETP Database.

This new database provides an in-depth look at the rapidly expanding European option-income market…

And you can download it completely for free!

European Option Income Fund Sheet

Due to the nature of these funds, there is a lot of very important information in this sheet-

Some of which are unique to European Funds.

So today, we will be breaking down the key metrics you MUST understand when analyzing these funds.

Today’s newsletter is sponsored by IncomeShares, which has been helping lead the educational effort around European option-income products.

You can check out their entire suite of products here: IncomeShares ETPs

Let’s dive in.

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🚀 A Rapidly Growing Market

European option-income products have attracted more than $8 billion in assets under management.

However, much of this market is still extremely new:

• 42 of the 83 products in the database launched in 2026

• 61 of the 83 products are less than two years old

• 79 of the 83 products are domiciled in Ireland

That rapid growth makes education surrounding these funds especially important.

IncomeShares has seen significant growth in fund flows over the last few years.

🗂️ What’s included in the database?

For each of the 83 European option-income products, investors can research metrics including:

• Ticker and fund name

• Product issuer

• Underlying asset

• Trailing 12-month distribution yield

• Assets under management

• Expense ratio

• Distribution frequency

• Active or passive management

• Option strategy

• Option moneyness

• Portfolio option coverage

• Fund domicile

• Exchange listings

• Available currencies

• Potential withholding-tax treatment

• UCITS or ETP structure

Each ticker also links directly to the issuer’s product page, making it easier to verify the information and continue your research.

The database also includes a complete column guide explaining what each metric means.

Let’s dive into what makes these funds unique:

⚖️ ETF vs ETP

One of the first things investors will notice is that the European market includes both ETFs and ETPs.

An ETF is an investment fund that owns a portfolio of assets.

Many European ETFs operate under the UCITS regulatory framework.

UCITS stands for Undertakings for Collective Investment in Transferable Securities.

It is a European regulatory framework designed to establish standards around diversification, liquidity, disclosure, custody, and investor protection.

The important detail is that UCITS includes diversification and concentration requirements.

These rules make it difficult to package certain highly concentrated, single-asset option strategies inside a traditional UCITS ETF.

That is where ETPs can be useful.

An ETP is generally structured as a debt security backed by collateral rather than as a conventional investment fund.

Because it uses a different legal structure, it can provide concentrated exposure that may not fit within the UCITS framework.

Neither structure is automatically better, there are pros and cons to both.

An ETF and an ETP simply represent different legal structures with different protections, risks, advantages, and limitations.

🇮🇪 Why Fund Domicile Matters

The database also shows where each product is legally established and regulated.

This would be a metric most glance over initially, but it is much more important than most realize.

Of the 83 products currently included, 79 are domiciled in Ireland.

Why is this the case?

The main reason Ireland has become Europe’s dominant ETF domicile is its tax treaty with the United States.

At the fund level, an eligible Irish-domiciled fund collecting dividends from U.S. companies can generally face a 15% U.S. withholding rate instead of the standard 30% rate.

IncomeShares has a great visual example of what this can look like:

For a portfolio of U.S. dividend-paying stocks, that difference can potentially be worth roughly 0.20% annually, more than the entire expense ratio charged by some investment products!

This helps explain why Ireland reportedly holds approximately 78% of European ETF assets and accounted for 95% of new European ETF launches in 2024.

Domicile may look like an unimportant administrative detail, but it can meaningfully affect a product’s tax efficiency, regulatory treatment, and investor protections.

If you want to dive deeper into this subject, IncomeShares has a great article that you can read about it here.

🌍 IncomeShares Commodity ETP Lineup

IncomeShares currently offers commodity option-income ETPs tied to copper miners, gold miners, gold, silver miners, silver, uranium, and WTI oil, as well as a multitude of other strategies.

The Gold+ Yield and Silver+ Yield ETPs use covered-call strategies, while the other commodity products use a cash-secured put plus equity strategy.

The main takeaway is that these products are not simply passive bets on commodity prices.

They combine commodity exposure with an options overlay designed to turn volatility into recurring income.

Many of their commodity ETPs currently have distribution yields near 12%.

🥇 A Real-World Example: IncomeShares Gold+ Yield ETP

Let’s use the IncomeShares Gold+ Yield ETP (GLDI) as an example of what investors can learn from the database.

The ETP currently has a distribution yield of roughly 12%.

But the database helps us understand how the ETP is actually structured, which will impact future performance.

According to the database, GLDI:

• Provides exposure to gold through GLD

• Has approximately $52.7 million in assets under management

• Charges a 0.35% expense ratio

• Pays distributions monthly

• Uses an actively managed options strategy

• Writes weekly out-of-the-money covered calls

• Maintains approximately 100% portfolio option coverage

• Is domiciled in Ireland

• Is structured as a collateralized ETP rather than a UCITS ETF

• Is available in U.S. dollars, British pounds, and euros across several European exchanges

The most important information here is the combination of weekly out-of-the-money calls and 100% portfolio coverage.

Because the calls are written out of the money, GLDI retains some of gold’s upside before reaching the options’ strike prices.

However, because approximately 100% of the portfolio is covered, which is why the yield is at 12%.

The tradeoff is that a significant rally in gold could cause the ETP to underperform GLD as its upside becomes capped.

That means the strategy may be most attractive when gold:

• Trades sideways

• Rises gradually

• Experiences elevated volatility without a major directional move

It may be less attractive during an explosive gold rally, because the covered calls could limit participation.

The database gives us the insights to better understand how the fund is structured, which gives further insights to what market environments are optimal for the fund.

🚨 Next Week Is Dividend Week

The launch of the European Option Income ETF & ETP Database is only the beginning.

I’m obsessed with finding new ways to increase the value Dividendology provides, and next week, we’re taking that to another level.

I’ll be releasing new research, resources, and insights focused entirely on helping investors find better dividend growth and high-yield opportunities.

That’s why I’m officially declaring next week “Dividend Week.”

There is much more coming, but I’ll leave it at that for now.

Like always, if you want to get access to the Dividendology Database, as well as all the features mentioned below, you can do so here:

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HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

Members will get access to the full list every month, as well as all other Dividendology features.

This month, only 54 stocks made the list.

Let’s dive in.

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1. 🗼 American Tower (AMT)

Wall St. Price Target: $212.00 | Upside: 20.59%

American Tower is one of the largest infrastructure REITs in the world, owning approximately 150,000 communications sites across the United States and international markets.

The business model overall is relatively simple.

Wireless carriers such as AT&T, Verizon and T-Mobile lease space on American Tower’s infrastructure to install their communications equipment.

These leases are generally long-term, include contractual rent increases and produce recurring revenue largely independent of consumer spending.

The economics become particularly attractive when multiple carriers occupy the same tower.

Most of the tower’s operating costs are already covered by the first tenant, which is a huge advantage, as this means additional tenants can generate revenue with very little additional expense.

This gives American Tower a scalable business model with high incremental margins.

The primary long term growth driver is the increase in mobile data consumption.

As consumers stream more video and carriers expand their 5G networks, additional equipment must be installed to increase network capacity.

American Tower’s second-quarter results verify this thesis.

Total property revenue increased 6.3% to $2.69 billion, adjusted EBITDA increased 3.2%, and AFFO attributable to shareholders increased 3.8%.

Management also raised its 2026 outlook, with AFFO per share now expected to reach between $11.00 and $11.17.

However, AFFO per share grew only approximately 1% after excluding currency movements.

The largest headwind was customer churn from DISH, which reduced organic tenant-billings growth by approximately 1.7 percentage points.

When the effects of DISH churn and higher refinancing costs are excluded, management estimates that AFFO per share grew by more than 5% on a currency-neutral basis.

AFFO per share is projected to grow at roughly 4.7% annually through the year 2030.

This REIT now yields 4.07%, with very strong dividend coverage with the AFFO payout ratio at just around 65%.

The underlying business is clearly performing better than the headline growth rate indicates.

American Tower also owns CoreSite, a collection of highly interconnected U.S. data centers.

CoreSite’s cash revenue increased approximately 12%, while management raised its full-year data-center growth forecast from 13% to approximately 15%.

CoreSite completed more new leasing during the quarter than it did during all of 2021, with nine of the world’s ten largest AI companies now deployed within its facilities.

This gives American Tower a second growth engine beyond traditional wireless towers.

American Tower trades at a 15.6x AFFO per share multiple, down nearly 50% over the last 5 years.

Its annualized $7.16 dividend produces a yield of approximately 4.1% and represents around 65% of projected AFFO, leaving the distribution reasonably well covered.

The primary risk that bears would point out is the balance sheet.

Net leverage remains elevated at 4.9 times, making refinancing costs and long-term interest rates significant for future AFFO growth.

They also have around 7% floating rate debt, which isn’t a large amount, but certainly matters in a high rate environment with rates projected to go higher.

Nevertheless, American Tower combines predictable contractual revenue, a sustainable dividend, continued mobile-data growth and rapidly expanding data-center demand.

Wall Street’s $212 average price target implies approximately 21% upside before including the dividend.

2. 🏦 Barclays (BCS)

Wall St. Price Target: $33.50 | Upside: 24.86%

Barclays is one of the largest banks in the United Kingdom, but its business extends far beyond traditional savings accounts and mortgages.

The company operates a diversified collection of businesses that includes:

1. UK consumer banking

2. Corporate lending

3. Wealth management

4. Credit cards

5. Major global investment banking

This diversification allows Barclays to generate revenue from interest on loans, banking fees, credit-card balances, investment-banking activity and financial-market trading.

Barclays has been one of the strongest-performing European banks over the last several years as profitability and capital returns have improved.

The company’s recently released their first-half results.

Total income increased 11% to £16.5 billion, while pre-tax profit increased 17% to £6.1 billion.

Earnings per share increased 24% to 30.7 pence, and return on tangible equity reached 14.8%.

Return on tangible equity, or RoTE, is one of the most important measurements of a bank’s performance.

It compares the profits available to common shareholders with the bank’s tangible common equity, excluding goodwill and other intangible assets.

Banks require substantial equity capital to support their loans and absorb potential losses.

RoTE therefore measures how efficiently management converts that capital into profits.

If a bank consistently earns a RoTE above its cost of equity, it is creating shareholder value and can generally justify trading above tangible book value.

A bank earning less than its cost of equity will often trade below tangible book value because it is failing to generate an adequate return on shareholders’ capital.

Higher RoTE also gives a bank more capacity to grow tangible book value, pay dividends and repurchase shares while maintaining its required capital ratios.

Barclays’ Common Equity Tier 1 ratio ended the quarter at 14.3%, near the top of management’s 13%–14% target range.

That excess capital is increasingly being returned to shareholders.

Barclays announced £2.3 billion of first-half capital returns, 61% more than a year earlier.

This included a new £1 billion repurchase program and approximately £800 million of dividends.

BCS currently yields 2.27% while boasting a three year dividend growth rate of 16.99%!

Keep in mind, like most European dividend stocks, the payouts can fluctuate, and they also payout semi-annually, not quarterly.

Management intends to return more than £15 billion between 2026 and 2028.

This means Barclays’ 2.27% dividend yield significantly understates its total shareholder yield because the company currently returns substantially more capital through buybacks.

However, operating expenses increased 7% during the second quarter, while structural cost actions are expected to reach approximately £600 million during 2026.

Higher investment-banking compensation, competitive pressure on UK deposits and rising credit provisions could also constrain future returns.

At approximately $27 per ADR, Barclays trades at roughly 10 times earnings and 1.2 times tangible book value.

For comparison, NatWest, Lloyds and HSBC trade at a median of approximately 1.72 times tangible book value, but they also generate a higher median RoTE of roughly 19%.

Applying an 18% discount to the peer multiple, reflecting Barclays’ lower RoTE, higher costs and more volatile investment-banking earnings, produces a justified valuation of approximately 1.4 times tangible book value.

That implies a fair value of approximately $31.50 per ADR, representing nearly 17% upside.

A more optimistic 1.5-times multiple produces a value of $33.75, closely matching Wall Street’s target.

Barclays appears undervalued, but reaching Wall Street’s target requires the bank to sustain a 15%–16% RoTE after unusually favorable investment-banking conditions normalize.

3. 🔎 Alphabet (GOOG)

Wall St. Price Target: $430.70 | Upside: 26.03%

Alphabet owns one of the most dominant collections of digital businesses in the world.

This was a company that was left for dead in Q2 of 2025, trading at a P/E of roughly 17x, but has since gone on to return well over 100%.

This was of course due to rapid expansion of the valuation multiple, as the market realized Google was a clear AI beneficiary.

Now the company is seeking to benefit from a different source of return:

Rapid EPS growth.

Google Search remains its primary profit engine, but the company also owns YouTube, Android, Chrome, Google Cloud, Waymo and a rapidly expanding portfolio of artificial-intelligence products.

This gives Alphabet several ways to monetize the continued growth of digital advertising, cloud computing and artificial intelligence.

Revenue increased 24% to $119.8 billion in the recent quarter, which is incredible when you consider the fact this is already a company with a $4T+ market cap.

Google Search revenue grew 17% to $63.3 billion, YouTube advertising increased 13% to $11.1 billion, and subscriptions, platforms and devices revenue increased 15% to $12.9 billion.

Google Cloud was easily the most impressive part of the quarter.

Cloud revenue increased 82% to $24.8 billion, accelerating from 63% growth during the previous quarter.

Operating income nearly tripled to $8.8 billion, while the segment’s operating margin expanded from 20.7% to 35.6%.

Google Cloud’s backlog also reached $514 billion, increasing by more than $50 billion during the quarter.

Management expects slightly more than half of this backlog to convert into revenue over the next two years.

Alphabet also recorded its first external sales of its custom Tensor Processing Unit systems.

This could be a huge development, as it has the ability to transform Google’s proprietary chips from an internal cost advantage into an additional source of revenue.

The company reported GAAP earnings of $9.11 per share, but this figure is extremely misleading.

Approximately $98 billion of Alphabet’s quarterly earnings came from gains on private investments such as SpaceX and Anthropic.

These gains are not recurring operating earnings and could reverse if the value of those investments declines.

Despite the exceptional operating growth, Alphabet shares sold off because of the amount being spent to build its AI infrastructure.

Capital expenditures reached $44.9 billion during the quarter, exceeding $39.1 billion of operating cash flow.

As a result, Alphabet generated negative free cash flow of $5.9 billion, which is its first negative quarter since becoming a public company.

Management also raised its 2026 capital-spending guidance to between $195 billion and $205 billion, with spending expected to remain elevated afterward.

This in no way represents immediate financial distress.

Alphabet still ended the quarter with approximately $130 billion of net cash, including leases.

The obvious concern is whether future AI and Cloud profits will produce acceptable returns on the enormous amount of capital being invested.

From a valuation perspective, Google looks incredibly cheap at first glance.

Paying 17x earnings for Google would be an incredible deal (as we saw last year).

Unfortunately, the much lower reported P/E of approximately 17 times is distorted by the unrealized investment gains that significantly increased GAAP earnings without increasing operating cash flow.

Google actually trades at roughly 25.6 times next-12-month normalized earnings.

However, even at that valuation, Google is still trading roughly in line with its historic valuation multiple.

Wall Street’s projected 26% upside depends on Cloud remaining exceptionally strong, Search successfully adapting to generative AI and capital expenditures eventually normalizing.

Google’s future returns entirely depend on whether its historic AI investment produces equally historic cash flows.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

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Every quarter, the world’s best investors quietly reveal exactly what they’re buying.

Most people never see it until it’s already too late.

Carbon Finance turns those filings into clean infographics you can read in five minutes, so you finally see where the money is going before the crowd catches on.

Over 50,000 investors already do. And it’s completely free, every Sunday.

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🕵️ Stealing From Super Investors

Do you know what one of the biggest winners in my portfolio was a few years ago?

A stock many have never heard of.

Jefferies Financial.

I was up over 125% in just over a year, with a yield on cost of over 5.10%.

The reason I discovered this stock?

Stealing ideas from Super Investors.

Super Investors are investors with over $100M in assets under management.

Every 3 months, they are required by law to reveal all of the moves they’ve been making in their portfolio.

This most recent quarter, they made some shocking moves.

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🔍 Dividendology Database

One of the best features of Dividendology.com?

The Dividendology Database

While we primarily use this database for alternative income asset classes, like:

• REITs

• BDCs

• Option Income ETFs

One of the things we also track in this database is the buying history of dividend stocks for Super Investors.

To my knowledge, this is the only resource for tracking these types of purchases on the internet.

While each quarter gives us insight into where capital is moving-

More importantly, it reveals the underlying trends of where the smart money has been moving over longer periods of time.

This is where the real insights come from.

Texas Instruments is the perfect example, and this quarter the story finally has an ending.

Texas Instruments was:

• The 6th most frequently bought stock in Q1 2025

• The 12th most frequently bought stock in Q2 2025

• The 7th most frequently bought stock in Q4 2025

Super Investors were accumulating it quietly while the financial media was busy talking about the MAG7 stocks.

Then they stopped… After the stock had an incredible run.

TXN has now failed to make the list for two consecutive quarters.

And look at what the stock did after they walked away.

TXN ripped over 53% in the second quarter alone, peaking at $332.

They accumulated it between roughly $150 and $200.

📉 Buying What Everyone Hates

In 1939, with Europe collapsing into war, a 26 year old named John Templeton did something that looked insane.

He borrowed money.

Then he bought 100 shares of every single stock on the U.S. exchanges trading below one dollar.

104 companies, most of which the market thought were headed for bankruptcy.

Four years later, that basket was up roughly 400%.

He went on to run the Templeton Growth Fund from 1954 to 1992, compounding at 14.5% annually versus 11.6% for the S&P 500.

A $10,000 investment became roughly $2 million.

He believed in buying during peak pessimism.

Keep that in mind as you read this quarter’s data…

Because this is exactly what Super Investors did in the recent quarter.

💰 Super Investors Top 10 Buys

Before we dive into the trends in where money is moving, let’s review the top purchases.

These were the top 10 most bought dividend stocks by Super Investors in the most recent quarter:

1. MSFT — Microsoft 🖥️

2. META — Meta Platforms 📱

3. V — Visa 💳

4. SPGI — S&P Global 📈

5. GOOG — Alphabet 🔎

6. DIS — The Walt Disney Company 🏰

7. COF — Capital One Financial 🏦

8. TMO — Thermo Fisher Scientific 🔬

9. DHR — Danaher 🧪

10. CMCSA — Comcast 📺

Below is the full list of the 50 Most Bought Dividend Stocks by Super Investors:

Members of Dividendology can access the entire database history at anytime on Dividendology.com.

Now, let’s look at the trends.

📊 Where the Money is Moving

Let’s review where capital is flowing right now.

The most widely bought sector by Super Investors this quarter was technology, with 14 of the top 50 names.

This breaks a two quarter streak of financials leading the list.

But the headline number is misleading.

Because this is not the technology you think it is.

• Nvidia fell from the 7th most bought stock last quarter all the way down to 30th

• ASML dropped off the list entirely

• Apple, which was the 3rd most bought stock two years ago, is now nowhere to be found

Super Investors were not buying the popular AI winners that everyone has had on their watchlist over the last year.

Instead, they were buying the companies the market has deemed is at risk of disruption due to AI.

Look at this list:

• SPGI — S&P Global, the 4th most bought stock, down over 21% in the last year

• ACN — Accenture, down over 26% in the last year (down 50% at one point)

• INTU — Intuit, down nearly 47% in the last year

• SAP — down over 18%

• EFX — Equifax, down over 20%

• CTSH — Cognizant, down nearly 12%

• CRM — Salesforce, down over 14% (down 39% at one point)

All of these are companies in software, IT services, and financial data.

This is certainly not a one quarter fluke either.

I went back and looked at the database and noticed an interesting trend.

The amount of these “AI victim” stocks on the top 50 list has climbed for four straight quarters now:

• Q2 2025: 3 names

• Q3 2025: 6 names

• Q4 2025: 7 names

• Q1 2026: 9 names

• Q2 2026: 9 names

Three of them were bought at the highest ranking they have ever held in this database.

S&P Global at 4th place, when its previous best was 17th.

SAP at 29th.

Cognizant appearing for the very first time.

Every single one of these stocks has seen a major bounce back in their share price from their Q2 bottom.

You can see the time period Super Investors were adding these stocks highlighted in the blue below:

The most notable climb was Accenture.

We highlighted Accenture as a unique opportunity in late June, when the stock was trading at $127 a share.

We used a reverse DCF model to reveal the fact the market was pricing in -9.8% free cash flow growth over the next decade.

This was peak pessimism.

The stock is now up over 50% since.

Intuit is up over 41% since quarter end.

Salesforce is up over 34%.

ADP is up nearly 26%.

S&P Global is up over 12%.

Over that same stretch, the S&P 500 returned roughly 2% and the technology sector was actually down.

💻 Big Tech

There is also something happening at the very top of this list that has never happened before.

The top 3 most bought dividend stocks are not just identical, but in identical order, for the third consecutive quarter:

1. Microsoft

2. Meta Platforms

3. Visa

I went back through nine quarters of data and there is no other instance of the same three names holding the same three spots twice in a row, let alone three times.

Super Investors were certainly averaging down, as Microsoft fell over 23% during the first quarter of this year while sitting in the number one spot.

The issue investors previously had was despite the fact MSFT had a massive backlog, most of that backlog was tied to OpenAI, creating customer concentration risk.

But Microsoft’s AI growth is now becoming more diversified.

Nearly 90% of its full-year cloud revenue came from customers outside frontier-model companies such as OpenAI.

Microsoft is now a much more diversified company.

Microsoft is up nearly 29% since quarter end, the best move of anything in the top 10.

Visa is sitting at a fresh 52 week high.

Meanwhile, Meta is the one that hasn’t worked (yet).

It’s down over 25% in the last year, nearly 30% off its high, and it has kept falling even after quarter end.

Also worth noting, there are only six companies that have appeared in all nine quarters of this database:

Microsoft, Meta, Visa, Alphabet, Taiwan Semiconductor, and UnitedHealth.

Only 27 of the 50 names carried over from last quarter.

🗂️ Use The Database!

By using the Dividendology Super Investor Database, we were able to identify the exact valuation range for TXN that Super Investors found attractive-

And we were able to watch what happened when they stopped buying.

As you go through the database, look for trends that may answer questions, like:

• Which “AI victim” stocks are Super Investors quietly accumulating before the narrative turns?

• Which stocks have appeared in every single quarter, and what does that tell us about durability?

• When Super Investors abandon a top holding, is that a warning or an opportunity?

• Which sectors are seeing capital rotation?

• Which stocks can we identify clear valuation ranges for?

The real advantage truly isn’t just analyzing the recent quarters buys-

It’s in identifying the trends.

If you want to get access to the Dividendology Database, as well as all the features mentioned below, you can do so here:

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